Many first-time employees are surprised when their first salary is lower than they expected. The reason is usually the difference between CTC (cost to company) and in-hand salary (also called take-home or net salary). Knowing the difference helps you compare offers and ask the right questions before you join.
CTC meaning: what CTC includes
CTC is everything the company spends on you in a year. It can include:
- Basic salary and allowances such as HRA (house rent allowance), conveyance and special allowance
- The employer’s PF contribution to your Provident Fund
- The employer’s ESI contribution, if your salary falls under ESI
- Gratuity, which you receive only after five years with the company
- Bonus or incentives, which may depend on performance or targets
- Sometimes insurance, meal cards or other benefits
Some of these never reach your bank account each month. That is why in-hand salary is lower than CTC divided by 12.
What is deducted from your salary
- Employee PF. Usually 12% of your basic salary goes into your Provident Fund. It is your savings and you can withdraw it under the PF rules, but it does not come to you each month. Many employers calculate it on a basic salary of up to ₹15,000.
- Employee ESI. If your gross salary is within the ESI limit (₹21,000 a month at the time of writing), 0.75% of it is deducted for medical cover through ESIC, and the employer adds its own share.
- Professional tax. Some states deduct it every month. Delhi does not charge professional tax.
- Income tax (TDS). Deducted only if your yearly taxable income is above the limit for the year. Most entry-level salaries pay no income tax, but check the rules for the current year.
A worked example
This example uses simple numbers to show the method. Your offer will be split differently, so always ask for your own salary break-up.
Suppose your offer says CTC ₹3,00,000 a year, and the company’s break-up is:
- Basic salary: ₹12,000 a month
- HRA and other allowances: ₹11,560 a month
- Employer’s PF (12% of basic): ₹1,440 a month
That adds up to ₹25,000 a month, or ₹3,00,000 a year. Your gross salary (before your own deductions) is basic plus allowances: ₹23,560 a month. The employer’s PF is part of CTC but goes straight to your PF account. Because the gross is above ₹21,000, ESI does not apply in this example.
From the gross, your own PF is deducted: 12% of basic, which is ₹1,440.
Your in-hand salary is ₹22,120 a month, compared with ₹25,000 if you simply divide the CTC by 12. In this example, ₹2,880 a month goes into your PF account (your ₹1,440 and the employer’s ₹1,440), so it is saved for you, not lost.
Questions to ask before you accept an offer
- What is my monthly in-hand salary?
- Can I see the salary break-up (basic, allowances, PF, ESI)?
- Is any part of the CTC a bonus or incentive that depends on targets? How is it paid?
- Is PF and ESI deducted?
- When is salary paid each month, and is it paid into a bank account?
Salaries on Urgent Hiring
Most jobs on Urgent Hiring show pay as a monthly range, such as “₹18,000 to ₹24,000 a month”, so you can compare jobs before you apply. Always confirm in the interview whether that range is gross or in-hand.