Complete Guide to Indian Salary Structure
Understanding every component of your CTC and how it affects your in-hand salary
Last Updated: December 30, 2025 | FY 2025-26
What is CTC and Why It's Not Your Take-Home Salary
When you receive a job offer in India, the salary is quoted as CTC (Cost to Company). However, your actual take-home salary (in-hand salary) is significantly lower than your CTC. Understanding this difference is crucial for financial planning and making informed career decisions.
Quick Example
If your CTC is ₹10,00,000 per year (10 LPA):
- Monthly CTC: ₹83,333
- Actual Monthly In-Hand: ₹65,000-70,000 (approximately)
- Difference: ₹13,000-18,000 per month goes to various components and deductions
This 15-20% reduction happens due to statutory deductions (income tax, PF, professional tax) and CTC components that aren't part of monthly salary (employer PF, gratuity).
Major Components of CTC
1Basic Salary (40-50% of CTC)
The foundation of your salary structure. Typically ranges from 40% to 50% of CTC.
Example Calculation:
CTC: ₹10,00,000 → Basic: ₹5,00,000 (50%)
Monthly Basic: ₹41,667
Important: Basic salary determines many other components including HRA, PF, and Gratuity. A higher basic percentage means better retirement benefits (PF accumulation) but also higher PF deduction.
2HRA - House Rent Allowance
Usually 40-50% of Basic Salary. Partially tax-exempt if you pay rent (only under Old Tax Regime).
Typical HRA Percentages:
- • Metro Cities (Mumbai, Delhi, Bangalore, Kolkata, Chennai, Hyderabad): 50% of Basic
- • Non-Metro Cities: 40% of Basic
HRA Tax Exemption (Old Tax Regime Only):
If you pay rent, you can claim HRA exemption. The exemption is the minimum of:
- 1. Actual HRA received
- 2. 50% of Basic (metro) or 40% (non-metro)
- 3. Rent paid minus 10% of Basic
Note: HRA exemption is NOT available under New Tax Regime (FY 2025-26).
3Special Allowance / Other Allowances
This is the "balancing" component. Whatever remains after Basic, HRA, and other fixed components.
Calculation: Gross Salary - (Basic + HRA) = Special Allowance
Example: If Gross = ₹80,000, Basic = ₹40,000, HRA = ₹20,000 → Special Allowance = ₹20,000
Special Allowance is fully taxable in both Old and New Tax Regimes. Some companies break this into sub-components like Transport Allowance, Medical Allowance, etc.
4Provident Fund (PF / EPF)
Both employer and employee contribute 12% of Basic Salary to the Employee Provident Fund.
Employee Contribution
- • Deducted from monthly salary
- • Reduces your in-hand pay
- • Tax-deductible under 80C (Old Regime)
Employer Contribution
- • Part of your CTC
- • NOT added to monthly salary
- • Goes directly to EPF account
Example:
Basic Salary: ₹40,000/month
- • Your contribution: ₹4,800/month (deducted from salary)
- • Employer contribution: ₹4,800/month (part of CTC)
- • Total PF deposit: ₹9,600/month
- • Annual PF accumulation: ₹1,15,200 + interest (~8.15% for FY 2024-25)
5Gratuity (4.81% of Basic)
A lump-sum payment you receive after completing 5 years of continuous service with an employer.
Key Point: Gratuity is part of your CTC but you DON'T receive it monthly. It's paid only when you resign/retire after 5 years or upon death/disability.
Calculation Formula:
Gratuity = (Last drawn salary × 15 × Years of service) / 26
This works out to approximately 4.81% of Basic Salary per year.
6Professional Tax (State-Specific)
A state-level tax on salaried individuals. Varies by state, with most states charging ₹200/month.
Common Professional Tax Rates:
- • Maharashtra, Karnataka: ₹200/month (₹2,400/year)
- • Tamil Nadu: ₹135-₹208/month
- • West Bengal: ₹110-₹200/month
- • Delhi, Uttar Pradesh: No professional tax
Maximum annual PT is capped at ₹2,500 in most states.
7ESI - Employee State Insurance
Applicable only if your monthly gross salary is below ₹21,000.
Employee contribution: 0.75% of gross salary
Employer contribution: 3.25% of gross salary
Benefit: Free medical care for you and your family at ESI hospitals and dispensaries.
Sample Salary Breakdown: 10 LPA
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