CTC Calculator: How to Calculate CTC From In-Hand Salary

Heard of CTC in salary but never understood completely?

NYGGS is here for you to clear your confusion about CTC in salary and how it is different from gross salary and in-hand salary (the actual salary that you get in your account). This blog further unfolds the details of the CTC to in-hand calculation formula, common types of deductions in India, and an understanding of the calculation with one example. Along with that, if you don’t want to juggle formulas, we have mentioned the top five CTC calculators in India. Let’s start!

What is CTC?

CTC is a short name for Cost to Company. This is a metric to calculate how much a company is spending on you in a year.

Let us tell you CTC seems impressive at first sight, but they are not equal to your salary. Salary is what you get, and CTC is what the company spends on you. That’s it!

Many people understand it as their salary, but it’s not. CTC in salary includes so many elements and variables, like:

• Basic Salary (your real salary)
• House Rent Allowance (HRA)
• Medical Allowance (private of ESIC)
• Provident Fund (EPF)
• Gratuity
• Bonus or Incentives
• Diwali/Yearly Gifts
• Mobile/Internet Bills (if your company provides you)
• Gym Memberships, Food Coupons, and Other Leisure
• Transport Allowance
• Other Benefits (vary upon different companies)

So in short, CTC in salary involves your salary (which is credited to your account monthly) plus the money the company spends on you. All these components are added to make up CTC.

Let’s take an example:

If your CTC is ₹6 lakh per year, this doesn’t mean you will take a ₹50,000 monthly salary to your home. Companies will deduct variables like PF, insurance, income tax, professional tax, and other variables (depending on company to company) and then send you your in-hand salary.

So CTC can be calculated with the formula: CTC = Gross Salary + In-hand Salary.

This formula raises three questions, what are in-hand salary and gross salary, and how is CTC different from in-hand salary? Let’s understand them in brief.

Gross Salary and In-Hand Salary – What Are They?

Without going deep into the salary and CTC, here are the simple meanings of three terms in compensation along with their formulas to calculate them.

What is Gross Salary?

This is the total amount of money an employee earns before any tax or deductions. This is an initial, comprehensive amount that includes components, like basic salary, HRA, travel allowances, special allowance, bonus, and any other extra money (allowances). So, Gross Salary

• Includes: Basic, HRA, Bonus, Special Allowance, or any other allowances.
• Excludes: Employer PF, Gratuity, Insurance, etc.

Formula to Calculate Gross Salary: 

Gross Salary = CTC – Employer PF – Gratuity – Other Benefits

What is In-Hand Salary?

This is the money that you get in your bank account monthly after all deductions are taken out. In-hand salary is also known as net salary and take-home salary. Additionally, you get net pay after varying deductions, as some deductions are mandatory and others are dependent on the company’s policy. So, In-hand salary excludes PF (employee contribution), income tax (TDS), professional tax, ESIC, and any loan/insurance recovery.

Formula to Calculate In-hand Salary:

In-hand Salary = Gross Salary – Employee PF – TDS – Professional Tax – Other Deductions

CTC vs In-Hand Salary vs Gross Salary

What are Some Common Deductions?

CTC in salary involves two types of deductions:

1. Statutory (Mandatory) Deductions

These are the deductions that are allowable by the government and need to be cut from salary mandatorily. Statutory deductions include:

• Income Tax: Simply, it is tax on your income. Can be said as TDS. Different in the old tax regime and the new tax regime.
• Employee Provident Fund (EPF): This is the amount the government made mandatory to secure your future. A 12% cut on the basic salary from both sides, employee and employer, and the government gives an interest rate on the PF amount.
• Professional Tax: This tax is different in different states depending on the labour rules they may have. Usually, PTs are nominal — ₹200 max/month. Some states in India do have such a tax.
• Employee State Insurance (ESI): It is health insurance; mostly, employees with lower salaries are eligible for this insurance. The current rule says that if you have a salary lower than ₹21,000/month, you are eligible for ESIC. Deductions of 0.75% from the employee side and 3.25% from the employer side happen for this.

2. Other Common Deductions

• Insurance Premiums: Life insurance, health insurance, etc., which can be deducted directly from your salary.
• Gratuity: It is included in CTC, but you will get it in reality only after you work for 5 years in the same company.
• Loan Repayments: If you have any loan (like a home loan or education loan) and the company makes a direct deduction, that too can be deducted from your salary.
• Retirement Plans/Voluntary Contributions: You can get money deducted from your salary as per your requirement for extra savings or pension.
• Donations/Union Dues: Some people get donations or union membership money deducted from their salary.
• Optional/Company-specific Deductions: Meal card, travel pass, canteen, hostel, etc.

The common deductions from salary in India are mainly income tax, PF, professional tax, ESI, insurance and some voluntary deductions. HRA, LTA, 80C, 80D, etc., are also used for tax savings. All these reduce your taxable income and save your in-hand salary.

How to Calculate In-Hand Salary from CTC (with Example)

Let’s take the example of CTC = ₹6,00,000/year mentioned above.

Step 1: CTC Components Breakdown

As we read CTC has some components such as:

Basic Salary: Usually 40-50% of CTC. Let’s take 45%.

So, the basic salary will be ₹6,00,000 × 45% = ₹2,70,000.

House Rent Allowance (HRA): 40% of Basic (for metro cities)

HRA = ₹2,70,000 × 40% = ₹1,08,000

Dearness Allowance (DA): 10% of CTC (common in government jobs but not in private jobs). You can ignore this amount, but to make the CTC calculation more comprehensive, let’s take it as 5%, for example.)

DA = ₹6,00,000 × 5% = ₹30,000

Employer PF: 12% of Basic (there is a cap in deciding that, but we are taking it at full basic pay)

So, the Employer PF will be ₹2,70,000 × 12% = ₹32,400.

Gratuity: (Basic × 15/26 × Years of service) / 12 × Months. (Take 1 year, for example; gratuity is negligible, so we can ignore it here.)

Medical/ESIC/Insurance: Assume it is ₹12,000.

Performance Bonus: ₹30,000 (for example, but usually it falls about 5% of CTC)

Special Allowance: Now, whatever extra income you are getting other than basic, HRA, or DA will be included in the special allowance.

So the special allowance is:

CTC minus (Basic + HRA + DA + Employer PF + Medical + Bonus)

 ₹6,00,000 – (₹2,70,000 + ₹1,08,000 + ₹30,000 + ₹32,400 + ₹12,000 + ₹30,000)

Special Allowance = ₹6,00,000 – ₹4,82,400 = ₹1,17,600

Note: In the actual salary structure, the employer adjusts some components to create a special allowance. If you do not have DA, for example, then the special amount can be more.

Step 2: Gross Salary Calculation

Monthly Gross Salary = Basic + HRA + DA + Special Allowance + Bonus (if paid monthly, else keep the annual bonus separate).

(₹2,70,000 + ₹1,08,000 + ₹30,000 + ₹1,17,600) ÷ 12 = ₹43,800/month (approx.)

Gross Salary (yearly): ₹2,70,000 + ₹1,08,000 + ₹30,000 + ₹1,17,600 = ₹5,25,600 

If you want to add an annual bonus to your gross salary, just add both of them: ₹5,25,600 + ₹30,000 = ₹5,55,600/year.

Step 3: In-hand Salary Calculation

In-hand Salary = Gross Salary – (Employee PF + Professional Tax + Income Tax)

Gross Salary (yearly): ₹5,25,600

Deductions:

• Employee PF: ₹32,400
• Professional Tax: It differs from state to state, but we are calculating the salary for an employee in Maharashtra, so the PT will be ₹2,400/year.
• Taxable Income: ₹0 for the New Tax Regime
• Total Deductions: ₹32,400 + ₹2,400 + ₹0 = ₹34,800.

Annual In-hand Salary: ₹5,25,600 – ₹34,800 = ₹4,90,800

In-hand Salary (monthly): ₹4,90,800 ÷ 12 = ₹40,900

Please Note That:

• In-hand salary usually remains 60–75% of CTC. Here, for a CTC of ₹6,00,000, the in-hand salary is calculated as ₹4,90,800, which is approx. 80%. This is because of our assumptions and example figures (like full HRA exemption, bonus already in CTC, etc.). But the in-hand salary usually falls within the 60 to 75% range.
• Professional Tax, Income Tax, and EPF deduction lower in-hand salary.
• Standard Deduction, HRA Exemption, and tax rebates lower the amount of taxable income.

Note: You can cross-check numbers using CTC calculators mentioned below. If you find a miscalculation, please report it by contacting us.

Top 5 CTC Calculators in India

1. CTC Calculator – https://www.ctccalculator.in/
2. Groww Salary Calculator – https://groww.in/calculators/salary-calculator
3. ClearTax Salary Calculator – https://cleartax.in/s/salary-calculator
4. QuikChex Salary CTC Calculator – https://quikchex.in/hr-toolkits/salary-ctc-calculator/
5. Take-Home Salary Calculator In India – ETMoney CTC Salary Calculator – https://www.etmoney.com/tools-and-calculators/salary-calculator

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