DotOne teamCTC vs gross salary vs in-hand salary
- CTC (cost to company): everything the employer spends on the employee in a year, including contributions the employee never receives in their salary account.
- Gross salary: CTC minus employer contributions such as employer PF, employer ESI and gratuity. It is the total of the earnings on the payslip.
- In-hand (net) salary: gross salary minus employee PF, employee ESI, professional tax and income tax. It is what reaches the bank account.
Salary components explained
| Component | What it is |
|---|---|
| Basic salary | The fixed core of pay, often 40–50% of CTC. PF and gratuity are calculated on it. |
| HRA | House rent allowance, often 40–50% of basic. Partly tax-exempt under the old tax regime if rent is paid; fully taxable under the new regime. |
| Special allowance | The balancing figure that makes the components add up to CTC. Fully taxable. |
| LTA, bonus, other allowances | Leave travel allowance, statutory or performance bonus, conveyance and others, depending on the employer. |
| Employer PF | 12% of basic, on basic up to the ₹25,000 a month wage ceiling (₹15,000 before 17 September 2026) unless the employer contributes on higher wages. |
| Employer ESI | 3.25% of gross for employees earning ₹21,000 a month or less. |
| Gratuity | About 4.81% of basic (15 days' pay for each year, ÷ 26 working days ÷ 12 months), paid on leaving after the qualifying service. |
| Insurance and other benefits | Group health or life cover, meal cards and similar, if the employer counts them in CTC. |
Worked example: ₹6 lakh CTC breakup
Basic at 50% of CTC, HRA at 40% of basic, PF on the ₹25,000 wage ceiling, gratuity included in CTC, professional tax of ₹200 a month and the new tax regime.
| Component | Yearly (₹) | Monthly (₹) |
|---|---|---|
| Basic | 3,00,000 | 25,000 |
| HRA | 1,20,000 | 10,000 |
| Special allowance | 1,29,570 | 10,798 |
| Gross salary | 5,49,570 | 45,798 |
| Employer PF (12% of ₹25,000) | 36,000 | 3,000 |
| Gratuity (4.81% of basic) | 14,430 | 1,203 |
| CTC | 6,00,000 | 50,000 |
| Less: employee PF | (36,000) | (3,000) |
| Less: professional tax | (2,400) | (200) |
| Less: income tax (taxable ₹4,74,570, within the ₹12 lakh rebate) | 0 | 0 |
| In-hand salary | 5,11,170 | 42,598 |
A ₹6 lakh CTC, or ₹50,000 a month on paper, becomes about ₹42,600 a month in hand. Gross is above ₹21,000 a month, so ESI does not apply. Monthly figures are rounded. Try other figures in the CTC to in-hand salary calculator.
Designing a salary structure
- Keep basic at a sensible share of CTC. A very low basic cuts PF and gratuity, but labour rules increasingly look at what counts as wages, so take advice before going below about half of total pay.
- Be clear about what is in CTC. State whether gratuity, insurance and variable pay are included, so offers are compared fairly.
- Use the same structure by grade. It makes payroll simpler and avoids disputes.
- Check the state. Professional tax and minimum wages differ by state.
In DotOne Payroll, salary components and structures are set up once, and every payroll run works out PF, ESI, professional tax and TDS from attendance, with payslips that show each component.