How in-hand salary is calculated in India

Your in-hand salary is the money that actually lands in your bank account each month. It is almost always far lower than your CTC (Cost to Company), because CTC bundles in costs the company incurs on you that are never paid out as monthly cash. Here is the exact sequence.

Step 1 — Start from cash CTC

Take your annual cash CTC (base + fixed allowances + variable/bonus). Exclude stock/RSUs — those vest separately and are taxed differently.

Step 2 — Remove employer contributions

CTC includes two things that never reach you as salary:

• Employer PF — 12% of basic (or 12% of the ₹15,000/month wage ceiling, i.e. ₹1,800/month, if your employer caps it).
• Gratuity — accrued at about 4.81% of basic per year.

Both are part of CTC but are set aside for you, not paid monthly.

Step 3 — Set aside variable pay

Variable / performance bonus is usually paid quarterly or annually, so it doesn't form part of your monthly in-hand — but it is still taxable income for the year.

Step 4 — Deduct your own contributions and taxes

From the remaining gross salary, subtract:

• Employee EPF — another 12% of basic, which goes to your retirement corpus.
• Professional tax — a small state levy, typically about ₹2,400/year.
• Income tax + 4% cess — after the ₹75,000 standard deduction and the ₹12L Section 87A rebate under the new regime.

Step 5 — Divide by 12

Whatever remains is your annual in-hand. Divide by 12 for the monthly figure. For most Indian tech salaries this lands around 65–80% of cash CTC, dropping as your CTC (and tax) rises.

The formula in one line

In-hand = CTC − employer PF − gratuity − variable − employee PF − professional tax − income tax (variable is added back only when it is actually paid).

Want the numbers for your salary? Use the free in-hand salary calculator or compare the new vs old tax regime.