CTC calculation India: what employers must include
CTC represents every rupee you spend on an employee each year, including statutory contributions under EPFO and ESIC.
When you calculate CTC for Indian employees, include the following.
Mandatory components
- Basic salary is often set near half of gross for wage code alignment and is the base for PF and gratuity
- Dearness Allowance where applicable
- HRA for tax efficiency, commonly fifty percent of basic for metros and forty percent for non metros
Statutory employer contributions
- Employer PF contribution is twelve percent of basic. Many employers cap PF calculation at a basic of ₹15,000 which makes the employer share ₹1,800 per month
- Gratuity provision is about 4.81 percent of basic each year
- ESI contribution is 3.25 percent of gross wages when applicable
- Labour Welfare Fund is state specific
Additional benefits
- Variable pay like performance bonus
- Medical insurance through a group plan
- Transportation support where relevant
- Meal benefits or food coupons as per policy
Formula: CTC = Basic + DA + HRA + Allowances + Variable Pay + Employer PF + Gratuity + ESI + Insurance + Other Benefits
In hand salary calculation India: employee deductions
In hand salary equals gross salary minus statutory deductions minus income tax minus other deductions.
Mandatory deductions from employee salary in India.
Statutory deductions
- Employee PF contribution is twelve percent of basic. When PF is capped at a basic of ₹15,000, the employee share is ₹1,800 per month
- Employee ESI is 0.75 percent of gross wages if eligible
- Professional Tax is state wise, for example common slabs in Maharashtra and Karnataka are ₹200 per month
- Labour Welfare Fund employee share where applicable
Income tax TDS
- New tax regime applies standard deduction and simple slabs
- Old tax regime allows deductions such as Section 80C and HRA benefits
- There is no separate state income tax in most states
Optional deductions
- Voluntary PF for additional retirement savings
- Medical insurance employee share if any
- Loans or advances as per policy
Note Professional tax differs by state. Verify current slabs for your locations.
Why this matters for your business
- Clear candidate expectations to avoid first payslip surprises
- Compliance confidence to prevent avoidable penalties
- Retention by showing the full value of compensation
- Budget accuracy based on true cost per employee
Real examples: CTC breakdown for Indian salaries
Example 1: ₹3 lakh CTC package
Typical for fresh graduates or junior roles.
| Component | Annual Amount | Monthly Amount | % of CTC |
|---|---|---|---|
| Employee receives | |||
| Basic salary | ₹1,50,000 | ₹12,500 | 50% |
| HRA | ₹60,000 | ₹5,000 | 20% |
| Special allowances | ₹72,000 | ₹6,000 | 24% |
| Gross salary | ₹2,82,000 | ₹23,500 | 94% |
| Employer contributions | |||
| Employer PF | ₹21,600 | ₹1,800 | 7.2% |
| Total CTC | ₹3,03,600 | ₹25,300 | 100% |
Employee deductions
- Employee PF ₹1,500 per month if PF on actual basic here. If PF is capped at basic of ₹15,000 then ₹1,800 per month
- Professional Tax about ₹200 per month where applicable
- Income tax often nil in new regime at this level
Final in hand about ₹21,800 per month depending on state and regime.
Example 2: ₹10 lakh CTC package
Common for experienced professionals in metros.
| Component | Annual Amount | Monthly Amount | % of CTC |
|---|---|---|---|
| Fixed components | |||
| Basic salary | ₹4,00,000 | ₹33,333 | 40% |
| HRA | ₹2,00,000 | ₹16,667 | 20% |
| Special allowances | ₹2,00,000 | ₹16,667 | 20% |
| Variable pay | |||
| Annual performance bonus | ₹1,00,000 | 10% | |
| Employer statutory | |||
| Employer PF | ₹21,600 | ₹1,800 | 2.2% |
| Gratuity | ₹19,200 | ₹1,600 | 1.9% |
| Medical insurance | ₹15,000 | ₹1,250 | 1.5% |
| Other benefits | ₹17,200 | ₹1,433 | 1.7% |
| Total CTC | ₹10,00,000 | 100% | |
Employee deductions
- Employee PF ₹1,800 per month when PF is capped, or twelve percent of basic if on actuals
- Professional Tax around ₹200 per month in common PT states
- Income tax varies with regime and declarations
Approximate in hand about ₹54,000 to ₹58,000 per month after deductions if PF is on actual basic and based on chosen regime.
Insight Lower CTC bands often see a higher in hand ratio because of lower tax impact. At higher CTC, tax reduces the in hand share.
Salary structure template for Indian employers
Use this format in offer letters to keep things simple and compliant.
Employment Offer - Salary Details
| Component | Annual (₹) | Monthly (₹) | Remarks |
|---|---|---|---|
| Basic salary | Base for PF and gratuity | ||
| HRA | Fifty percent metro, forty percent non metro | ||
| Special allowances | Other fixed allowances | ||
| Variable pay | Performance linked | ||
| Gross salary | Monthly credit | ||
| Employer statutory contributions | |||
| Employer PF | Often capped at basic of ₹15,000 | ||
| Gratuity | As per Gratuity Act | ||
| ESI | If eligible | ||
| Medical insurance | Group cover | ||
| Other benefits | Meal, transport, and more | ||
| Total CTC | Annual company cost | ||
Employee statutory deductions
- Employee PF twelve percent of basic or ₹1,800 when capped
- Professional Tax state specific slab
- ESI employee share when eligible
- Income tax TDS based on regime and declarations
- Other deductions as per policy
Subject to tax regime and declarations
- PF calculation policy should be stated clearly
- ESI applies only within the notified wage limit
- Professional tax differs by state and slab
- TDS depends on chosen regime and investment proofs
Frequently asked questions
Clear answers for Indian employers who want transparent salary structures and simple compliance.
What is the difference between CTC and in hand salary in India
CTC is the total annual cost the company spends on an employee. In hand salary is the bank credit after PF, ESI, Professional Tax, and TDS.
Is PF contribution capped in monthly salary calculations
Many employers compute PF on a basic of fifteen thousand per month. That makes employer share ₹1,800 and employee share ₹1,800. Companies can choose PF on actual basic as a policy.
Does Professional Tax apply in every Indian state
Professional Tax is a state subject. Some states levy it and some do not. Always confirm the slab for each office location.
When does ESI apply for salary
ESI applies when an employee is within the notified wage limit. If eligible, both sides contribute at the prescribed rates.
How should HRA be set for metro and non metro cities
Many employers set HRA at fifty percent of basic for metros and forty percent for non metros to improve tax efficiency for eligible employees.
What is a quick way to estimate in hand salary from CTC
A simple thumb rule is seventy to eighty five percent of gross depending on tax slab, PF policy, ESI, and Professional Tax.
Do more with Offrd
- Generate compliant offer letters from a single CTC value
- Create payslips with PF, ESI, and PT auto calculations
- Track attendance for office, remote, and field teams
- Stay compliant with a live checklist for statutory updates
Key takeaways for Indian employers in 2025
The employment landscape is changing. New wage code alignment, evolving tax structures, and higher focus on transparency make salary structure design more important than ever.
When your team understands that you contribute to PF, provide medical cover, and build gratuity, they value the complete package, not only the monthly credit.
About this guide This guide covers CTC and in hand salary for employers across Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Pune, and Kolkata. Updated for common 2025 practices including PF policy choices and state PT awareness.
Disclaimer This is general guidance. Consult qualified HR or tax professionals for your specific needs. Rates and laws may change, verify with official sources.