Last updated: 9 November 2026
- Gross, net and CTC in one table
- The three formulas
- Worked examples at ₹4, ₹9, ₹15 and ₹25 LPA
- How the 50% wage rule changes the picture
- Why 'gross' means different things on different documents
- How to compare two offers
- Mistakes people make when reading an offer
- Employee and employer PF: 12% each of basic + DA, often capped at the ₹15,000 ceiling (₹1,800 a month).
- Gratuity provision in CTC: usually 4.81% of basic; paid only after 5 years (1 year for fixed-term staff).
- Labour codes notified 21 November 2025: wages (basic + DA) should be at least 50% of total remuneration for PF and gratuity.
- New tax regime: ₹75,000 standard deduction and no tax up to ₹12 lakh taxable income.
- Professional tax: up to ₹2,500 a year depending on the state.
Sources: Code on Wages, 2019; Code on Social Security, 2020; EPF Scheme, 1952; Income Tax Act / Income-tax Act, 2025.
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| CTC | Gross salary | Net (in-hand) salary | |
|---|---|---|---|
| What it is | Everything the company spends on you in a year | Salary paid to you before deductions | What reaches your bank account |
| Includes | Gross + employer PF + gratuity + variable + insurance/other benefits | Basic, HRA, special allowance, other allowances (+ bonus when paid) | Gross − employee PF − professional tax − TDS |
| Where you see it | Offer letter | Payslip (monthly), Form 16 (yearly) | Payslip, bank statement |
| Biggest of the three? | Yes | Middle | Smallest |
If you want the CTC side in more depth, with a breakup of each component, read our guide on CTC meaning and in-hand salary.
The three formulas
Formulas
CTC = Gross salary + Employer PF + Gratuity + Variable pay + Other benefits Gross salary = Basic + DA + HRA + Special allowance + Other allowances (+ bonus when paid) Net salary = Gross salary − Employee PF − Professional tax − Income tax (TDS) − other deductions
In the examples below we use one common structure so you can compare across salary levels: basic = 50% of CTC, HRA = 40% of basic, PF on the ₹15,000 ceiling (except where noted), gratuity at 4.81% of basic, and special allowance as the balancing figure. Tax uses the new regime with slabs assumed unchanged for FY 2026-27, and professional tax is ₹200 a month.
Worked example: ₹4 LPA
| Component | Annual (₹) | Monthly (₹) |
|---|---|---|
| Basic | 2,00,000 | 16,667 |
| HRA | 80,000 | 6,667 |
| Special allowance | 88,780 | 7,398 |
| Gross salary | 3,68,780 | 30,732 |
| Employer PF | 21,600 | 1,800 |
| Gratuity | 9,620 | |
| CTC | 4,00,000 |
₹4 LPA: gross to net
Gross monthly: ₹30,732 − Employee PF: ₹1,800 − Professional tax: ₹200 − TDS: ₹0 (taxable ₹2.94 lakh, below ₹12 lakh) Net (in-hand) monthly: ₹28,732 Net as % of CTC ÷ 12 (₹33,333): about 86%
Worked example: ₹9 LPA
| Component | Annual (₹) | Monthly (₹) |
|---|---|---|
| Basic | 4,50,000 | 37,500 |
| HRA | 1,80,000 | 15,000 |
| Special allowance | 1,36,755 | 11,396 |
| Gross salary (fixed) | 7,66,755 | 63,896 |
| Variable pay | 90,000 | Paid yearly, if earned |
| Employer PF | 21,600 | 1,800 |
| Gratuity | 21,645 | |
| CTC | 9,00,000 |
₹9 LPA: gross to net
Gross monthly: ₹63,896 − Employee PF: ₹1,800 − Professional tax: ₹200 − TDS: ₹0 (taxable ≈ ₹7.82 lakh incl. variable) Net (in-hand) monthly: ₹61,896 Annual gross incl. variable: ₹8,56,755 Net as % of CTC ÷ 12 (₹75,000): about 83%
Worked example: ₹15 LPA
| Component | Annual (₹) | Monthly (₹) |
|---|---|---|
| Basic | 7,50,000 | 62,500 |
| HRA | 3,00,000 | 25,000 |
| Special allowance | 2,42,325 | 20,194 |
| Gross salary (fixed) | 12,92,325 | 1,07,694 |
| Variable pay (10%) | 1,50,000 | Paid yearly, if earned |
| Employer PF | 21,600 | 1,800 |
| Gratuity | 36,075 | |
| CTC | 15,00,000 |
₹15 LPA: gross to net
Annual gross incl. variable: ₹14,42,325 Taxable (− ₹75,000): ₹13,67,325 Tax: 20,000 + 40,000 + 25,099 = 85,099 + 4% cess = ₹88,503 → ≈ ₹7,375/month Gross monthly: ₹1,07,694 − Employee PF: ₹1,800 − Professional tax: ₹200 − TDS: ₹7,375 Net (in-hand) monthly: ₹98,319 Net as % of CTC ÷ 12 (₹1,25,000): about 79%
Worked example: ₹25 LPA (PF on full basic)
At higher salaries, many companies calculate PF on the full basic instead of the ₹15,000 ceiling. That builds more savings, but cuts monthly in-hand pay. This example uses PF on full basic.
| Component | Annual (₹) | Monthly (₹) |
|---|---|---|
| Basic | 12,50,000 | 1,04,167 |
| HRA | 5,00,000 | 41,667 |
| Special allowance | 2,89,875 | 24,156 |
| Gross salary (fixed) | 20,39,875 | 1,69,990 |
| Variable pay (10%) | 2,50,000 | Paid yearly, if earned |
| Employer PF (12% of basic) | 1,50,000 | 12,500 |
| Gratuity | 60,125 | |
| CTC | 25,00,000 |
₹25 LPA: gross to net
Annual gross incl. variable: ₹22,89,875 Taxable (− ₹75,000): ₹22,14,875 Tax: 20,000 + 40,000 + 60,000 + 80,000 + (2,14,875 × 25%) 53,719 = 2,53,719 + 4% cess = ₹2,63,868 → ≈ ₹21,989/month Gross monthly: ₹1,69,990 − Employee PF: ₹12,500 − Professional tax: ₹200 − TDS: ₹21,989 Net (in-hand) monthly: ₹1,35,301 Net as % of CTC ÷ 12 (₹2,08,333): about 65%
All four side by side
| CTC | Monthly gross | Monthly deductions | Monthly net | Net ÷ (CTC ÷ 12) |
|---|---|---|---|---|
| ₹4 LPA | ₹30,732 | ₹2,000 | ₹28,732 | 86% |
| ₹9 LPA | ₹63,896 | ₹2,000 | ₹61,896 | 83% |
| ₹15 LPA | ₹1,07,694 | ₹9,375 | ₹98,319 | 79% |
| ₹25 LPA | ₹1,69,990 | ₹34,689 | ₹1,35,301 | 65% |
Variable pay is excluded from monthly net but included when estimating annual tax. If your variable pay is paid in one month, TDS that month will be higher. Old-regime numbers differ if you claim HRA, 80C and similar deductions.
Going backwards: from net to gross
Recruiters sometimes ask for your current gross when you only know what hits your bank. Start from net pay, add back employee PF, professional tax and the TDS shown on your payslip, and you have monthly gross. Multiply by 12 and add any bonus paid in the year to get annual gross. Then add employer PF, gratuity and variable pay to get CTC. Your March payslip's year-to-date column does most of this work for you.
How the 50% wage rule changes the picture
The labour codes notified on 21 November 2025 define wages as basic + DA + retaining allowance. If excluded items (HRA, conveyance, special allowances and similar) are more than 50% of total remuneration, the excess is added back to wages for PF and gratuity. Companies that kept basic low (30–40%) are the ones affected.
Worked example: basic at 30% of pay
Monthly pay (excluding employer PF and gratuity): ₹60,000 Basic: ₹18,000 (30%) Allowances: ₹42,000 (70%) 50% limit on allowances: ₹30,000 Excess added back to wages: ₹12,000 Wages for PF/gratuity: ₹30,000 PF on full wages, before: 12% × 18,000 = ₹2,160 PF on full wages, after: 12% × 30,000 = ₹3,600 → in-hand falls ₹1,440 PF on ₹15,000 ceiling: ₹1,800 both ways → in-hand unchanged Gratuity per year of service, before: 18,000 × 15 ÷ 26 = ₹10,385 Gratuity per year of service, after: 30,000 × 15 ÷ 26 = ₹17,308
| What changes | Effect on you |
|---|---|
| Gross salary | Usually unchanged; it is a reshuffle inside the same CTC |
| Net (in-hand) salary | May fall slightly if PF is on full wages; unchanged if PF is on the ₹15,000 ceiling |
| PF savings | Rise if PF is on full wages |
| Gratuity | Rises, because it is calculated on wages |
| CTC | Fixed; employers may cut special allowance to absorb higher PF/gratuity |
The rules on how employers apply the cap and the ceiling are still settling. If your structure changed after November 2025, ask HR how PF is calculated and check your contract.
Why 'gross' means different things on different documents
| Document | What 'gross' usually means |
|---|---|
| Payslip | Total earnings for the month before deductions |
| Offer letter / CTC annexure | Sometimes 'gross' = CTC − employer PF − gratuity (may include variable). Read the breakup |
| Form 16 | Gross salary u/s 17(1) + perquisites + profits in lieu of salary, for the whole year, including bonus |
| Loan application | Monthly gross from your payslip; banks also look at net pay |
| Recruiter conversation | Often means fixed annual pay before deductions. Ask |
Because of this, always ask for the component breakup before you accept. Our salary slip format guide shows how these numbers look on a real payslip, and Form 16 explains the yearly version.
How to compare two offers
Two offers compared
Offer A: ₹12 LPA CTC, 20% variable, PF on full basic (basic 50%) Offer B: ₹11.5 LPA CTC, no variable, PF on ₹15,000 ceiling Offer A fixed (CTC − variable − employer PF − gratuity): 12,00,000 − 2,40,000 − 72,000 − 28,860 = ₹8,59,140 → ₹71,595/month gross Employee PF: ₹6,000 → net before tax ≈ ₹65,595 Offer B fixed: 11,50,000 − 21,600 − 27,658 = ₹11,00,742 → ₹91,729/month gross Employee PF: ₹1,800 → net before tax ≈ ₹89,729 The lower CTC pays about ₹24,000 more every month.
Use the monthly gross and net, not CTC, when you compare. Then negotiate on the fixed part. Our guide on how to negotiate salary has scripts for asking for a better split.
Mistakes people make
| Mistake | Fix |
|---|---|
| Treating CTC ÷ 12 as monthly pay | Work from gross, then subtract PF, PT and TDS |
| Counting variable pay as guaranteed | Ask what percentage was actually paid last year |
| Ignoring gratuity's 5-year condition | Leave before 5 years and you won't get it |
| Assuming higher PF is lost money | It is your savings, earning EPF interest; it just isn't in-hand |
| Comparing gross across regimes | Tax depends on regime; compare net after choosing one |
FAQs
What is gross salary?
Your total salary before deductions: basic, DA, HRA, special allowance and other allowances, plus bonus when it is paid.
What is the difference between gross salary and net salary?
Net salary is gross salary minus employee PF, professional tax, income tax (TDS) and any other deductions. It is what reaches your bank.
What is the difference between gross salary and CTC?
CTC adds employer-side costs to gross salary: employer PF, gratuity, variable pay and benefits such as insurance.
What is the gross salary for ₹9 LPA CTC?
With basic ₹4.5 lakh, HRA ₹1.8 lakh and special allowance ₹1,36,755, fixed gross is ₹7,66,755 a year, or about ₹63,896 a month. Net is about ₹61,896 a month.
Is gross salary before or after tax?
Before tax. Income tax (TDS) is deducted from gross to arrive at net.
Does gross salary include PF?
It doesn't include employer PF. Employee PF is part of gross and is deducted from it to reach net.
Does gross salary include bonus?
Bonus is part of gross salary in the month it is paid, and in your yearly gross in Form 16. Monthly gross on a payslip usually excludes annual variable pay.
How does the 50% wage rule affect gross salary?
Gross usually stays the same. If allowances exceed 50% of pay, the excess counts as wages for PF and gratuity, which can raise PF and gratuity and slightly lower in-hand pay if PF is on full wages.
How much of my CTC will I get in hand?
Roughly 80–86% of CTC ÷ 12 at ₹4–15 LPA with PF on the ceiling, and around 65% at ₹25 LPA with PF on full basic and higher tax.
