Guide · Salary basics
CTC vs gross salary vs net salary — what each means and how to get from one to the other
CTC (cost to company) is everything the employer spends on you in a year, including its own PF and ESIC contributions. Gross salary is CTC minus those employer-side costs. Net or in-hand salary is gross minus your own deductions — employee PF, employee ESIC, professional tax and TDS.
Run accurate payroll · Browse jobs
The three numbers
| Term | What it includes | Who uses it |
|---|---|---|
| CTC | Gross salary + employer PF + employer ESIC + gratuity provision + other employer-paid benefits | Offer letters, budgets |
| Gross salary | Basic + DA + HRA + all allowances, before any deduction | Payslips, ESIC eligibility, PT slab |
| Net (in-hand) salary | Gross − employee PF − employee ESIC − professional tax − TDS − other recoveries | What reaches the bank account |
Worked example
A Pune-based male employee with a monthly gross of ₹20,000 made up of basic + DA ₹12,000 and allowances ₹8,000. Figures are monthly; TDS is nil because annual taxable income is well within the new-regime rebate limit.
| Line | Calculation | Amount |
|---|---|---|
| Gross salary | 12,000 + 8,000 | ₹20,000 |
| Employer PF | 12% × 12,000 | ₹1,440 |
| Employer ESIC | 3.25% × 20,000 | ₹650 |
| Monthly CTC (before gratuity/other benefits) | 20,000 + 1,440 + 650 | ₹22,090 |
| Employee PF | 12% × 12,000 | − ₹1,440 |
| Employee ESIC | 0.75% × 20,000 | − ₹150 |
| Professional tax (Maharashtra, man) | slab above ₹10,000 | − ₹200 |
| Net (in-hand) salary | 20,000 − 1,440 − 150 − 200 | ₹18,210 |
Why the same CTC can give different in-hand pay
- Basic share. PF is on basic + DA, so a higher basic means more PF and less in-hand today (and more retirement savings).
- ESIC eligibility. Employees who join above ₹21,000 gross are not covered — no 0.75% deduction, but no ESIC medical cover either. A mid-period raise does not end cover until that contribution period ends.
- State. Professional tax differs by state; some states have none.
- Tax regime and declarations. TDS depends on the regime chosen and investment declarations.
- Loss of pay. Unpaid leave reduces gross for that month and everything calculated from it.
The 50% wage rule
Under the Labour Codes, in force since 21 November 2025, if excluded allowances exceed 50% of total remuneration, the excess is treated as wages. Structures with a very small basic and large allowances may therefore see PF and gratuity calculated on a higher base than before. See PF and ESIC calculation.
Frequently asked questions
Is gratuity part of CTC?
Many employers include a gratuity provision (commonly 4.81% of basic) in CTC even though it is paid only on exit after the qualifying service. Ask how your offer letter treats it.
Is gross salary the same as taxable salary?
Not always. Some components may be exempt and deductions such as the standard deduction reduce taxable income.