If my CTC is ₹20 LPA, how much will I get in hand?

If your offer letter says ₹20,00,000 CTC, your monthly in-hand will likely be somewhere between ₹1,20,000 and ₹1,35,000 — not ₹1,66,667. The gap exists because CTC is a cost-to-company figure, not a take-home figure. It bundles together your salary, your employer's statutory contributions, and sometimes perks like insurance. This article walks through the exact math, component by component.

What does CTC actually include?

CTC stands for Cost to Company. It is every rupee the company spends on you in a year. That includes money you receive in your bank account, money deducted from your salary and deposited elsewhere on your behalf, and non-cash benefits the company pays for.

A typical CTC for a salaried employee in India has these components:

The components in rows 4, 5, and 6 never hit your bank account as monthly income. Yet they are part of your CTC.

What actually gets deducted from your salary each month?

Before your salary reaches your bank, three main deductions happen:

1. Employee EPF Contribution — 12% of basic salary

Under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, both you and your employer contribute 12% of your basic salary to your EPF account. The employee share (12%) is deducted from your gross monthly pay. Your employer's 12% is a separate outflow that is added to your CTC but does not come out of your gross pay — it was never in your gross pay to begin with.

2. Professional Tax

A state-level levy, but the amount varies by state. Maharashtra charges ₹200 per month for 11 months and ₹300 for one month — totalling ₹2,500 per year. Karnataka charges ₹200 per month flat — totalling ₹2,400 per year. States such as Delhi, Haryana, and Gujarat do not levy professional tax at all.

3. Income Tax (TDS)

Your employer deducts tax at source every month based on your estimated annual tax liability. Under the new tax regime (default for FY 2025-26), there is a standard deduction of ₹75,000. The slabs are:

A 4% health and education cess applies on the total tax amount. Income up to ₹12,75,000 attracts zero tax for salaried individuals (₹12,00,000 rebate limit under Section 87A plus ₹75,000 standard deduction).

Key Point:

Employer EPF and gratuity are part of your CTC but they are not deductions from your gross pay — they were never part of your gross pay. The confusion arises because CTC includes both what flows to you and what flows away from the company on your behalf.

Worked example: ₹20 LPA CTC, realistic breakdown

Here is a realistic salary structure for a ₹20,00,000 CTC at a mid-sized Indian company:

Step 1 — CTC components (annual)

Note: Gratuity is provisioned at approximately 4.81% of basic (which equals 15/26 × basic × 1 year). Group medical insurance is a non-cash benefit.

Step 2 — Monthly gross salary (what gets credited before deductions)

The gross monthly salary is everything except employer EPF, gratuity, and insurance — because those are not credited to you.

Step 3 — Monthly deductions

Step 4 — In-hand salary

₹1,42,600 − ₹18,700 = approximately ₹1,23,900 per month

That is the number that lands in your bank account. Against a CTC of ₹20 LPA, you take home roughly ₹1,23,000–₹1,25,000 per month depending on your tax situation.

Key Point:

The ₹96,000 employer EPF and ₹38,480 gratuity provision in your CTC are real money — just not right now. EPF accumulates and earns 8.25% interest (FY 2025-26 rate). Gratuity is paid as a lump sum when you exit after five or more years. They are deferred compensation, not lost money.

Why is the income tax TDS estimate complicated?

The TDS in the example above (₹10,500/month) assumes:

• New tax regime (default)
• No HRA exemption claimed (i.e., not paying rent, or paying rent under the old regime)
• No other deductions

If you are paying rent and claim HRA exemption under the old tax regime, your TDS could drop significantly. If your employer includes performance bonus in the CTC and pays it mid-year, TDS in that month spikes. Many payslips show fluctuating TDS for exactly this reason.

Why does the special allowance exist and why is it fully taxable?

Companies structure salary this way because basic and HRA have downstream consequences (EPF, gratuity, HRA exemption). The special allowance is a residual — it is whatever is left over after fixing the other components. It has no exemptions attached to it under the new tax regime and is fully taxable as salary income.

The components you never see on your payslip

• Employer EPF: Shown on your PF passbook at epfindia.gov.in, not on your payslip gross
• Gratuity: A liability the employer provisions for; paid out only on qualifying exit
• Group insurance premium: The employer pays the insurer directly; you only see the benefit card

Bottom line

• A ₹20 LPA CTC will typically yield ₹1,20,000–₹1,30,000 in hand per month, not ₹1,66,667
• The gap is made up of: employer EPF (~₹8,000/month), gratuity provision (~₹3,200/month), non-cash benefits (~₹4,500/month), and income tax TDS (~₹10,500/month)
• Basic salary percentage determines how much goes to EPF and gratuity — more on this in the next article
• Employer EPF and gratuity are real financial benefits, just deferred

Frequently asked questions

Is employer EPF contribution shown on my payslip?

Not usually. Most payslips show only the employee-side EPF deduction (12% of basic). The employer contribution of 12% is part of your CTC and goes directly into your EPF account — you can verify the total balance at the EPFO Member Portal at epfindia.gov.in.

Can my employer include a variable bonus in the CTC figure?

Yes, and many do. A common structure is "fixed CTC + variable pay at 100% performance." The variable is often included at the target amount in the headline CTC figure. If you perform below target, your actual take-home is lower than the CTC math suggests.

Why does my in-hand salary change slightly each month?

TDS is the main reason. If your employer recalculates your projected annual tax liability mid-year — because you submitted investment proofs late, or because a bonus was paid — they adjust the monthly TDS accordingly. EPF and professional tax are fixed.

Does the employer EPF contribution count toward my 80C limit?

No. Only the employee's EPF contribution (12% of basic) counts toward the ₹1,50,000 Section 80C limit, and only under the old tax regime. Employer EPF has its own tax treatment and is not part of 80C.

If I opt out of EPF, does my in-hand go up?

Employees earning above the EPF wage ceiling (₹15,000/month basic) can in some cases opt for a different structure, but complete opt-out is not straightforward for most employees covered under the EPF Act. This is an HR and compliance question specific to your employer.

Where can I verify my EPF balance?

At the EPFO Member e-Sewa portal: epfindia.gov.in. You need your UAN (Universal Account Number), which is linked to your Aadhaar and PAN.

Sources

• EPF contribution rates: epfindia.gov.in — Contribution Rate PDF
• Income tax slabs FY 2025-26: incometax.gov.in — Salaried Individuals AY 2026-27
• Standard deduction ₹75,000 and nil tax up to ₹12,75,000: pib.gov.in — No Income Tax Up to ₹12 Lakh
• EPF interest rate 8.25% for FY 2025-26: epfindia.gov.in