What is the difference between CTC and in-hand salary?
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CTC (Cost to Company) is the total annual expenditure a company makes for an employee — including employer PF (12% of basic), gratuity, and all allowances. In-hand salary is the actual amount credited to your bank account after deducting employee PF, ESI, income tax (TDS), and professional tax from your gross salary. Typically, in-hand is 65–80% of CTC depending on salary level and tax regime.
How is in-hand salary calculated from CTC in India 2026?
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Step 1: Remove employer PF (12% of basic) and gratuity (4.81% of basic) from CTC to get Gross Salary. Step 2: Calculate Basic (40–50% of gross), HRA (40–50% of basic), and Special Allowance. Step 3: Deduct employee PF (12% of basic), ESI if applicable, TDS based on tax slab, and Professional Tax. The remaining amount is your monthly in-hand salary.
Which is better — New Tax Regime or Old Tax Regime in FY 2026–27?
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For most salaried employees in FY 2026–27, the New Tax Regime is better because: (1) Income up to ₹12 lakh is effectively tax-free due to Section 87A rebate, (2) Standard deduction of ₹75,000 is available, (3) Lower tax rates across all slabs. The Old Regime is beneficial only if your total deductions (80C + HRA + 80D + home loan) exceed approximately ₹3.75 lakh annually — which is rare for most employees.
What is PF deduction and how is it calculated on salary?
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PF (Provident Fund) deduction is 12% of the employee's Basic Salary + Dearness Allowance, with a wage ceiling of ₹15,000 for EPS contribution purposes. Both employee and employer contribute 12%. Employee's 12% is deducted from salary — it goes to EPF account. Employer's 12% is split: 8.33% to EPS (pension) and 3.67% to EPF. This is deducted before you receive your salary and is part of your long-term savings.
Is HRA fully tax-exempt?
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No, HRA is partially tax-exempt. The exempt amount is the lowest of: (1) Actual HRA received, (2) Rent paid minus 10% of Basic Salary, (3) 50% of Basic Salary for metro cities (Delhi, Mumbai, Chennai, Kolkata) or 40% for non-metro cities. The remaining HRA is added to taxable income. Under the New Tax Regime, HRA exemption is not available — HRA becomes fully taxable.
What is Professional Tax and who pays it?
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Professional Tax (PT) is a state-level tax deducted by employers from employees' salaries. It varies by state — Maharashtra and Karnataka charge ₹200/month (₹2,400/year), West Bengal charges ₹150/month. Some states like Rajasthan, Delhi, and Haryana have no Professional Tax. It is deductible under the Income Tax Act. Maximum PT across India is ₹2,500/year.
How can I increase my in-hand salary without a raise?
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Several ways to optimise your in-hand salary: (1) Claim HRA exemption if you pay rent, (2) Submit 80C proofs (ELSS, PPF, insurance) up to ₹1.5L under Old Regime, (3) Use NPS deduction (additional ₹50,000 under 80CCD), (4) Restructure salary to include LTA and food allowances, (5) Choose the correct tax regime that suits your deductions. Under the New Regime (default 2026), optimisation is limited but it automatically gives lower tax for most people.
What is ESI and when is it applicable?
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ESI (Employee State Insurance) is applicable only if your gross salary is ₹21,000/month or below. Employee contributes 0.75% of gross salary and employer contributes 3.25%. ESI provides health, maternity, disability, and other social security benefits. Once your gross exceeds ₹21,000/month, ESI stops being deducted — though you retain benefits for some time.
