Question 1

What exactly is in-hand salary, and why is it less than my CTC?

Accepted Answer

Your CTC (Cost to Company) is the total amount your employer spends on you — including employer PF contributions, gratuity provisions, and sometimes even benefits like insurance. Your in-hand salary is what actually hits your bank account after three things are removed: deductions your employer makes on your behalf (like employee PF and professional tax), income tax deducted at source (TDS), and CTC components that are not paid monthly (like gratuity). So if your CTC is ₹12 LPA, your monthly take-home could realistically be anywhere between ₹75,000 and ₹90,000 depending on your structure and tax liability.

Question 2

Old regime or new regime — which one actually saves me more money?

Accepted Answer

The honest answer is: it depends on your rent and investments. The new regime has lower tax rates and gives you a flat ₹75,000 standard deduction — no other benefits. The old regime has higher rates but lets you claim HRA exemption (if you pay rent), Section 80C deductions up to ₹1.5 L (PPF, ELSS, LIC, EPF etc.), health insurance under 80D, and home loan interest under Section 24. If you pay significant rent — say ₹20,000+ per month — and also max out your 80C investments, the old regime often wins. If you have minimal deductions or earn under ₹12.75 L (new regime tax-free threshold with rebate), the new regime is usually better. Our calculator runs both and tells you instantly.

Question 3

How is the HRA exemption calculated, and can I claim it if I live with my parents?

Accepted Answer

HRA exemption under the old regime is the minimum of three values: (1) the actual HRA you receive from your employer, (2) 50% of your basic salary if you live in a metro city or 40% if non-metro, and (3) the rent you actually paid minus 10% of your basic salary. Here is an example: if your basic is ₹40,000/month, you receive ₹20,000 HRA, and pay ₹18,000 rent in Mumbai — your exemption is min(₹20,000, ₹20,000, ₹14,000) = ₹14,000/month. As for living with parents — you can pay your parents rent via bank transfer, get a rent receipt, and claim HRA. Your parents must declare this as income, but if their total income falls below the taxable threshold, the family as a whole saves on tax. Note that HRA exemption is not available in the new regime at all.

Question 4

How is Provident Fund deducted, and does it come out of my gross or CTC?

Accepted Answer

PF works on two levels. Your employer contributes 12% of your basic salary to your PF account — this is part of your CTC but does not appear in your monthly salary. You also contribute 12% of your basic, and this amount is deducted from your monthly gross. So PF reduces your take-home. The calculation is typically capped at ₹15,000 basic salary — meaning even if your basic is ₹60,000, the statutory PF is 12% of ₹15,000 = ₹1,800/month. Some companies calculate PF on your actual basic (no cap), which increases your PF savings but reduces your monthly take-home further. You can toggle between these two modes in our calculator.

Question 5

What is professional tax and who charges it?

Accepted Answer

Professional Tax (PT) is a state-level tax on employment income. It is not a central government tax, so the rates vary from state to state. Maharashtra charges ₹200/month (with ₹300 in February, making it ₹2,500/year). Karnataka also charges ₹200/month. Tamil Nadu charges up to ₹208/month depending on income. Delhi, Haryana, and a few other states have no professional tax at all. The maximum PT anyone can be charged per year across India is ₹2,500. It is deducted by your employer and deposited with the state government. It shows up as a small line item on your payslip.

Question 6

Why does gratuity reduce my monthly take-home even though I never see it?

Accepted Answer

Gratuity (4.81% of your basic salary) is indeed part of your CTC, but your employer sets this money aside as a fund — you only receive it when you leave after completing 5 or more years of service. Because it is part of your CTC, it reduces the amount available for your monthly salary. If your CTC is ₹10 L and gratuity is included, roughly ₹48,000/year (₹4,000/month) is being set aside for your future gratuity benefit. Some companies exclude gratuity from CTC, in which case you can toggle it off in our calculator.

Question 7

What is ESI and do I need to pay it?

Accepted Answer

ESI stands for Employee State Insurance. It is a social security scheme that provides health and maternity benefits. You are only covered (and charged) if your monthly gross salary is ₹21,000 or below. If applicable, you contribute 0.75% of your gross as the employee share, and your employer contributes 3.25%. For most salaried professionals with packages above ₹3 LPA, ESI is not applicable — which is why it is off by default in our calculator. If your package is modest and your gross falls under the threshold, you can switch ESI on.

Question 8

What are surcharge and health cess — do they apply to me?

Accepted Answer

Surcharge is an additional levy on income tax for higher earners. It kicks in only if your taxable income crosses ₹50 L — so most salaried employees are not affected. The rate is 10% on income tax for income between ₹50 L and ₹1 Cr, 15% between ₹1 Cr and ₹2 Cr, and so on. Health and Education Cess is different — it applies to everyone. It is 4% calculated on your income tax plus surcharge. Even if you owe ₹1,000 in income tax, you pay an extra ₹40 as cess. Our calculator always includes cess in the tax figure, so the number you see is your all-inclusive tax liability.

Question 9

I already contribute to EPF — can I still claim the full ₹1.5 L under Section 80C?

Accepted Answer

Your own EPF contribution (12% of basic) counts toward the ₹1.5 L Section 80C limit. So if your annual EPF contribution is ₹60,000 (₹5,000/month), you have ₹90,000 of the 80C limit remaining for other instruments like PPF, ELSS, LIC premiums, or NSC. This is an important nuance that many people miss. If your EPF is already near ₹1.5 L/year (possible with a high basic salary), you have little room for additional 80C deductions. Our calculator handles this automatically by adding your EPF to whatever 80C amount you enter and capping the total at ₹1.5 L.

Question 10

Why does the percentage of basic salary matter so much?

Accepted Answer

Basic salary percentage has a ripple effect across your entire payslip. A higher basic means more HRA (calculated as a % of basic), higher PF deductions (both employee and employer), higher gratuity (4.81% of basic), but also a higher HRA exemption if you pay rent. On the flip side, a lower basic reduces your PF burden and increases your special allowance — which boosts take-home but offers no tax benefits under the old regime. Employers often use a lower basic (say 40%) to reduce their statutory liability. For you, the right basic % depends on whether tax savings from HRA and PF outweigh the higher deductions — which is exactly what our calculator lets you explore.

CTC to In-Hand Salary Calculator

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FY 2026-27 tax changes