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How Much Will I Take Home Monthly If My CTC Is 18 LPA?

Written by: Suraj Uday SinghUpdated on: Apr 2, 2025, 11:12 AM IST
For a CTC of ₹18 LPA, the estimated in-hand monthly salary is around ₹1,32,000 after deductions like taxes and EPF. Understanding salary components and tax exemptions helps optimise take-home pay effectively.
How Much Will I Take Home Monthly If My CTC Is 18 LPA?
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When considering a job offer, salary is one of the most important factors. However, the salary mentioned in your offer letter is typically given as Cost to Company (CTC), which differs from the actual in-hand salary you receive every month. This is because CTC includes various components such as basic salary, allowances, performance incentives, and retirement benefits.

To determine your actual take-home pay, you must account for deductions such as taxes, Employee Provident Fund (EPF), and other company benefits. Let’s explore how to calculate the in-hand salary for a CTC of ₹18 LPA (lakhs per annum) and understand how different salary components and deductions impact your take-home pay.

What Is CTC and Why Is It Important?

Cost to Company (CTC) is the total annual expense a company incurs on an employee. It includes several components such as basic salary, allowances, incentives, and employer contributions. While CTC provides an overall view of the compensation package, it is not the exact amount credited to an employee’s bank account each month. Understanding CTC breakdown helps in estimating the in-hand salary more accurately.

Breakdown of CTC for 18 LPA

  1. Basic salary: Basic salary forms around 50% of the total CTC. For an ₹18 LPA package, the basic salary would be approximately ₹9 LPA.
  2. Allowances: Allowances cover expenses such as House Rent Allowance (HRA), Conveyance Allowance, and Medical Allowance. These typically constitute around 30% of the CTC. In this case, allowances would amount to approximately ₹5.4 LPA.
  3. Performance-based incentives: Bonuses and incentives vary based on company policies and individual performance. They generally make up around 20% of the CTC, which translates to approximately ₹3.6 LPA.
  4. Retirement benefits: Retirement benefits include contributions towards EPF and other pension schemes. These typically account for around 10% of the CTC, amounting to approximately 1.8 LPA.

Based on this breakdown:

Total CTC = Basic Salary + Allowances + Performance-Based Incentives + Retirement Benefits
= ₹(9 LPA + 5.4 LPA + 3.6 LPA + 1.8 LPA)
= ₹19.8 LPA

However, the in-hand salary is lower due to various deductions.

Deductions That Impact Your In-Hand Salary

  1. Income Tax: Income tax is deducted from the gross salary based on the applicable tax slab. Employees earning 18 LPA typically fall under the 20% tax slab, with applicable exemptions reducing the tax burden.
  2. Employee Provident Fund (EPF): Employees contribute 12% of their basic salary towards EPF, and the employer makes an equal contribution. This deduction is mandatory and helps in long-term savings.
  3. Professional Tax: Professional tax is a state-level tax levied on individuals earning a salary. It varies by state but has a maximum annual limit of INR 2,500.
  4. Other Deductions: Additional deductions may include health insurance, life insurance, or company-specific benefits. These deductions further reduce the in-hand salary.

Calculation of In-Hand Salary for 18 LPA

To estimate the in-hand salary, we deduct taxes and other contributions from the gross salary.

In-Hand Salary = Gross Salary – Deductions
= ₹(19.8 LPA – 20% of 19.8 LPA)
= ₹15.84 LPA

Note: This is a general CTC breakdown. Actual take-home pay may vary based on company policies, individual circumstances, and deductions like insurance and income tax. Your final salary will also depend on whether you opt for the new tax regime (lower tax rates with fewer exemptions) or the old tax regime (higher tax rates with deductions and exemptions).

Optimising Your Salary Package

To maximise your take-home pay, consider the following strategies:

  1. Claim tax exemptions: Use exemptions such as HRA, Leave Travel Allowance (LTA), and standard deductions to reduce taxable income.
  2. Opt for tax-saving investments: Investing in EPF, Public Provident Fund (PPF), or National Pension Scheme (NPS) can help reduce tax liability.
  3. Negotiate for higher take-home pay: While negotiating your salary, ask for a better balance between fixed and variable components to ensure a higher in-hand salary.

Conclusion

Understanding the difference between CTC and in-hand salary is crucial when evaluating a job offer. For a CTC of 18 LPA, the approximate take-home pay is around 15.84 LPA after deducting taxes, EPF, and other contributions. To optimise your in-hand salary, take advantage of tax exemptions and financial planning strategies. By understanding salary components and deductions, you can make informed decisions and effectively plan your finances.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Published on: Mar 27, 2025, 4:16 PM IST

Suraj Uday Singh

Suraj Uday Singh is a skilled financial content writer with 3+ years of experience. At Angel One, he excels in simplifying financial concepts. Previously, he cultivated his expertise at a leading mortgage lending firm and a prominent e-commerce platform, mastering consumer-focused and engaging content strategies.

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