Difference Between CTC and In-Hand Salary

  • Updated on: 3 Jan 2024
  • Published on: 3 Sep 2021
Difference Between CTC and In-Hand Salary

Have you noticed that the CTC discussed while hiring is generally different from what you actually get in hand? There’s a considerable difference between CTC and gross salary and in-hand salary.

It is crucial to understand the differences between these terms since knowing how they work helps you approach salary negotiations in a more informed manner. For a brief overview of the CTC vs in-hand salary and how they are calculated, read on.

What is the in-hand salary?

In order to understand CTC and gross salary differences, you must know what is in-hand salary. Also called take-home salary, this is a part of your CTC that you actually get after all the deductions have been made. 


In-hand salary = Your gross salary – Deductions

Take-home pay is the amount of money deposited in your account by your employer every month post all deductions.

What is the gross salary?

Gross salary is the amount you receive from your employer before any deductions are made. Your gross salary includes the following components without any tax deductions:

  • Basic pay
  • Bonus
  • Allowances

How is net salary calculated?

This amount is calculated by combining your basic pay and allowances. Various types of taxes (income tax, EPF, professional tax) are then subtracted from the sum. 

Net Salary = Basic Salary + Allowances – Income Tax/TDS – Employee Provident Fund – Professional Tax

Read the meanings of the terms in the formula below.

  • Basic salary: Also referred to as in-hand salary, it is a fixed component of your total compensation that always stays the same.
  • Allowances: You may get several allowances like home rent allowance (HRA), leave travel allowance (LTA), dearness allowance, children’s education allowance, etc.
  • Income tax/TDS: Your employer deducts the tax applicable to your salary (based on the slab) before crediting your salary. This tax is also called tax deducted at source (TDS). 
  • Employers’ Provident Fund: Here, the employer’s contribution is 12% of your monthly salary, credited to the EPF account. The current interest rate on EPF accounts is fixed at 8.15%. 

What is CTC?

Are you wondering what is CTC in salary? If you wish to know the difference between CTC and gross salary, it is essential to understand CTC first. CTC or cost to a company is the amount that an employer incurs in order to hire an employee. 

Here are the CTC components you need to know with a hypothetical example:

CTC componentAmount
Total CTC₹10,00,000
Gross salary₹8,50,000
Performance bonus₹1,50,000
Professional tax₹200
Employer PF₹1,800
Employee PF₹1,800
Employee Insurance₹250
Total monthly deductions₹4,050
Total annual deductions₹48,600
Net take home monthly₹66,783
Net take home annual₹8,01,400

Simply put, CTC is the amount the employer or company spends after recruiting you and utilising your services. Remember, CTC is a variable pay, which includes several direct and indirect benefits from the employer. 

While direct benefits include your take-home salary per government taxes, the amount paid by the employer on your behalf constitutes the indirect benefits. Apart from these, the savings schemes you are eligible for are also included in the CTC. 

You can calculate your salary from CTC when you do the following:

First compute your gross salary, which is CTC – Employer’s EPF contribution – Gratuity

Then compute your in-hand salary, which is Gross Salary – Income tax – your PF contribution – Professional tax. 

How is CTC calculated?

CTC is computed by adding the total cost of any supplementary benefits received by the employee during the service year to the employee’s salary. 

CTC = Gross salary + PF + Gratuity 


CTC = Direct benefits + Indirect benefits + Savings contributions

Read the meanings of the terms in the formula below.

  • Gross salary: As discussed above, this refers to your entire pay before deductions. 
  • Provident Fund (PF) is a government-managed retirement savings program for employees. Both employees and employers are required to deposit 12% of the basic salary into the PF account.
  • Gratuity: Gratuity is the total sum of the amount paid by the employer to an employee at the time of retirement. 

What is the difference between CTC and in-hand salary? 

Now that you know what these terms entail, you can easily determine the conclusion of the CTC vs in-hand salary debate. While CTC is the amount including all deductibles, your in-hand salary means what you actually get after all the deductions have been made.

Simply put, CTC contains numerous deductibles in your overall compensation but is not credited to your account monthly. On the other hand, in-hand salary is the amount credited to your bank account every month as part of your salary. The deduction from this sum is made by the company to contribute towards:

  • Employee’s Provident Fund (EPF)
  • TDS and Professional Tax (PT)
  • Employee State Insurance (ESI)

The numerous deductions from your gross income result in a significant CTC and gross salary difference. As a result, it is critical to understand your salary structure and the many terminologies that form an important part of the calculation. 

Knowing these terms helps you make sound financial decisions about your salary package, tax-saving programstrip planning and more. You can easily finance goals, from vacations to medical needs, with an Instant Loan or Fibe’s personal loan that you can apply for in minutes on the Fibe App.  

FAQs about CTC and in-hand salary

Is the in-hand salary the same as CTC?

No, in-hand salary and CTC are different. While in-hand salary is the money deposited in your account every month after all deductions, CTC constitutes your total salary package.

How is CTC calculated from in-hand salary?

In-hand salary is a part of your total CTC. To calculate it all you have to do is apply this simple formula:

In-hand salary = CTC – Sum of all deductibles

What is the difference between CTC and in-hand salary?

CTC is the total amount spent by an employer on you for utilising your services, while in-hand salary is the amount you receive every month after deductions.

What are CTC and gross pay?

If you are still confused about what CTC is in salary, you can consider it as the company’s total cost in order to hire an employee. On the other hand, gross pay is the part of your salary without any deductions.

Which is better: CTC or gross salary?

The CTC includes the following components: 

  • Salary contributions
  • Reimbursements and tax benefits

The gross salary consists of the following:

  • Basic pay
  • House rent allowance
  • Travel allowance 
  • Dearness allowance

Subtracting the gratuity and EPF contributions from CTC can help you determine the gross salary. CTC is considered better than gross salary because of its umpteen benefits.

Is PF included in CTC?

Yes, your employer’s contribution towards Provident Fund is included in your CTC.

Are LPA and CTC the same?

No, LPA and CTC are not the same thing. LPA refers to Lakhs Per Annum and it is a measure using which you can express your CTC or Cost to Company as your salary package. For instance, if your CTC is ₹1.50 lacs per year, you can mention it as a CTC of ₹ 1.50 LPA. 

Is the joining bonus included in CTC?

Yes, any joining bonus that your employer offers you is usually a part of your CTC. 

Is the salary hike calculated on CTC or basic?

Any salary hike you get is calculated on your basic pay or base salary. 

What is CTC for ₹18,000 salary?

If you are earning ₹18,000 a month as your in-hand salary, you will need to know the bonus, if any, and total annual deductions to calculate your CTC. 

What is CTC for ₹40,000 salary?

Your CTC depends on various components such as your allowances, deductions and basic pay. So, if you are earning ₹40,000 a month as your in-hand salary, you can only compute your CTC by adding in these figures. 

What is CTC for ₹5 lacs?

Your CTC changes based on whether you are getting ₹5 lacs as your annual or monthly salary as well as all your deductions and allowances. You can calculate your CTC only once you know your salary break-up and other details.


Our top picks

Can Millennial Stress be Resolved by Financial Wellness?
Finance | 3 mins read
How Organisations Can Measure the Impact of Financial Wellness Programs
Finance | 3 mins read
How Can HR help Overcome Staffing Challenges in the Digital Age?
Corporate | 3 mins read
5 Signs of A Good HR Function
Corporate | 3 mins read