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