CTC vs In-Hand Salary: What Freshers Get Each Month
CTC, or cost to company, is everything a company spends on you in a year, including money you never receive as monthly salary. In-hand salary is what reaches your bank account each month after provident fund, professional tax and income tax. For a typical fresher offer of ₹12 lakh CTC, the fixed in-hand pay works out to about ₹78,000 a month, not ₹1 lakh. Here is where the difference goes.
What's inside a CTC
| Part | What it is | Paid to you monthly? |
|---|---|---|
| Basic salary | The base of the pay; often 40 to 50% of CTC | Yes |
| HRA | House rent allowance, often 40 to 50% of basic | Yes |
| Special allowance | Whatever is left of the fixed pay | Yes |
| Employer PF | The company's 12% of basic into your provident fund | No: it goes to your PF account |
| Gratuity | About 4.81% of basic, paid only if you stay 5 years | No |
| Variable or performance pay | A bonus that depends on ratings | Once or twice a year, if earned |
| Joining bonus | A one-time amount, often with a clawback if you leave early | Once |
| ESOPs or RSUs | Shares that vest over years | No |
What comes out of your monthly pay
- **Employee PF:** 12% of basic goes into your provident fund each month, matching the employer's share. It's your money, but not in-hand
- **Professional tax:** a state tax of up to ₹2,500 a year, charged by some states (about ₹200 a month where it applies)
- **Income tax (TDS):** your employer deducts it each month, spread over the year
Income tax on a fresher salary
Most freshers are on the new tax regime, the default. For FY 2025-26 (AY 2026-27), the [Income Tax Department lists](https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1) these rates: nothing up to ₹4 lakh, then 5%, 10%, 15%, 20% and 25% for each further ₹4 lakh, and 30% above ₹24 lakh. A rebate under section 87A cancels the tax, up to ₹60,000, when taxable income is ₹12 lakh or less. Salaried people also get a ₹75,000 standard deduction first, and 4% cess is added to any tax. Check the current year's figures on that page before you rely on them; HRA exemption is not available in the new regime.
Worked example: ₹12 lakh CTC
| Item | Per year |
|---|---|
| Basic | ₹4,80,000 |
| HRA | ₹1,92,000 |
| Special allowance | ₹3,27,312 |
| Employer PF (12% of basic) | ₹57,600 |
| Gratuity (4.81% of basic) | ₹23,088 |
| Variable pay (10% of CTC) | ₹1,20,000 |
| Fixed cash salary (basic + HRA + special) | ₹9,99,312 |
| Less employee PF | ₹57,600 |
| Less professional tax | ₹2,400 |
| Taxable income (fixed + variable − ₹75,000) | ₹10,44,312 |
| Income tax | ₹0 (under ₹12 lakh, so the 87A rebate covers it) |
| Fixed in-hand per month | ₹78,276 |
| In-hand for the year, if the full variable is paid | ₹10,59,312 |
Worked example: ₹18 lakh CTC
| Item | Per year |
|---|---|
| Fixed cash salary | ₹14,98,968 |
| Variable pay | ₹1,80,000 |
| Employer PF and gratuity (not paid out) | ₹86,400 + ₹34,632 |
| Less employee PF | ₹86,400 |
| Less professional tax | ₹2,400 |
| Taxable income | ₹16,03,968 |
| Income tax with 4% cess | ₹1,25,625 |
| Fixed in-hand per month | ₹1,07,045 |
| In-hand for the year, if the full variable is paid | ₹14,64,543 |
How to read your offer letter
- Find the **fixed** part of the CTC, and work out the monthly in-hand from it as above. That's what you can plan your rent around
- Treat **variable pay** as a maybe until you know how the company rates and pays it
- Check the **joining bonus** for a clawback clause, and any **service agreement or bond**
- Ask HR for the salary breakup if the letter only shows CTC; most companies share it
Two offers, side by side
Compare fixed in-hand first, then variable, then the rest. A ₹14 lakh CTC with 25% variable can pay less each month than a ₹13 lakh CTC with 5% variable. If you're weighing an internship offer against campus placements, the [PPO guide](/blog/pre-placement-offer-ppo-accept-or-not) covers the decision itself, and [what a PPI is](/blog/what-is-ppi-pre-placement-interview) covers the interview route.