CTC vs Gross Salary vs Net Salary: What's the Difference?
If you've ever been confused why your offer letter says ₹12 lakh CTC but your bank credit is only ₹75,000 per month — this guide is for you.
CTC (Cost to Company)
CTC is the total annual cost the company incurs for employing you. It includes everything — your salary, benefits, employer PF, gratuity provision, insurance, and any other perks. It is NOT what you receive.
CTC = Gross Salary + Employer PF contribution + Gratuity provision + Other company-borne costs
Gross Salary
Gross salary is what you earn before employee-side deductions. It's the salary visible in your payslip under "Earnings." Gross salary = CTC minus employer PF and gratuity provision (roughly).
Gross Salary components typically include: Basic, HRA, Special Allowance, Medical Allowance, Transport/Food Allowance, LTA, and any other earnings.
Net Salary (Take-Home / In-Hand)
Net salary is what lands in your bank account. It's gross salary minus all employee-side deductions: TDS (income tax), employee EPF contribution, and professional tax.
Net Salary = Gross Salary − TDS − Employee PF − Professional Tax
Real Example: ₹12 Lakh CTC Breakdown
| Component | Monthly | Annual |
|---|---|---|
| Basic Salary (40%) | ₹40,000 | ₹4,80,000 |
| HRA (50% of basic) | ₹20,000 | ₹2,40,000 |
| Special Allowance | ₹20,000 | ₹2,40,000 |
| Medical Allowance | ₹2,000 | ₹24,000 |
| Gross Salary | ₹82,000 | ₹9,84,000 |
| Employer PF (12% of basic) | ₹4,800 | ₹57,600 |
| Gratuity Provision (4.81%) | ₹1,924 | ₹23,088 |
| Total CTC | ₹88,724 | ~₹12,00,000 |
Deductions from Gross:
| Deduction | Monthly |
|---|---|
| Employee PF (12% of basic) | ₹4,800 |
| TDS (estimated, new regime) | ~₹5,000 |
| Professional Tax (Maharashtra) | ₹200 |
| Total Deductions | ~₹10,000 |
| Net Take-Home | ~₹72,000 |
Why the Gap Between CTC and In-Hand?
- Employer PF: Company pays ₹4,800/month extra as their EPF contribution. You don't see this in your payslip.
- Gratuity: Company sets aside ₹1,924/month. You only get this after 5 years of service.
- Insurance: Any group health/term insurance premium paid by company is often included in CTC.
- Employee PF deduction: ₹4,800 from your gross — this goes into your EPF account, not lost.
- TDS: Income tax deducted monthly based on estimated annual liability.