Learn · Your first salary
Reading your payslip
Why your CTC isn't what reaches your bank, line by line.
4 min read
CTC is not in-hand
CTC (cost to company) is everything your employer spends on you in a year. It includes money you never see in your account each month, like the employer's share of PF and sometimes gratuity or insurance.
Where it goes
₹50,000 a month CTC: where it goes
- Reaches your bank₹45,000
- Your PF₹2,400
- Employer's PF₹2,400
- Professional tax₹200
- Income tax (TDS)₹0
Illustration: ₹6 lakh a year, basic at 40% of CTC, Karnataka's professional tax, new tax regime (no tax at this salary). Your payslip will differ.
What you earn
Basic pay is the base most other parts are calculated from. HRA (house rent allowance) helps with rent and can reduce tax in the old regime if you pay rent. Special allowance is usually whatever is left to make up the CTC.
What gets taken out
Employee PF is usually 12% of basic and goes to your EPF account; it's your money, saved for later. Professional tax is a small state tax, at most ₹2,500 a year. TDS is income tax your employer deducts every month, based on the tax regime you choose.
Myth
PF deductions are money lost.
Fact
Your PF and your employer's matching share both go into your EPF account and earn interest. You can track it on the EPFO portal with your UAN.
Put in your CTC to see a rough in-hand figure.
Open the calculatorWords from this lesson
- Basic pay: The fixed core of your salary. PF, HRA and gratuity are worked out from it.
- CTC: Cost to company: everything your employer spends on you in a year, including parts you don't get as monthly pay.
- EPF: Employees' Provident Fund: retirement savings your employer and you both pay into each month.
- Gratuity: A lump sum your employer pays when you leave after 5 or more years.
- Gross salary: Your salary before tax and your own PF are taken out.
- HRA: House rent allowance: part of salary meant for rent. Can lower tax in the old regime if you pay rent.
- In-hand salary: What actually reaches your bank account each month.
- Special allowance: The flexible part of your salary left after basic, HRA and PF. Fully taxable.
Next in Your first salary: PF: the money you save without noticing