We are often misled by attractive CTC offers from employers. However, the actual In Hand salary often turns out to be significantly less than the CTC. Therefore, in this article, we aim to educate you on how to calculate In Hand salary from your CTC. We’ll use a 12 LPA CTC as an example to illustrate the calculation.
While you’re aware that tax rates are lower in the New Tax Regime, it’s important to note that tax exemptions and deductions such as House Rent Allowance (HRA), Section 80C deductions, Leave Travel Allowance (LTA), Food Coupons, etc., are not applicable under this regime. In the recent 24-25 Budget, the Finance Minister has enhanced the New Tax Regime by increasing standard tax deductions and improving income slabs. Despite no changes in the Old Tax Regime, it remains advantageous for certain income earners. (Know how to build passive income that lasts long time)
Under the New tax regime, there are only a few exemptions that are relevant to your situation, namely —
Employer’s contribution to your PF
Employer’s Contribution to your NPS account
Conveyance/Travel Allowance, Research Allowance, few others/etc.
Now, let’s go straight on how to calculate In hand salary from CTC of 12 LPA (Lakh per Annum)
Your CTC consists of the following components —
Basic Salary
Exgratia
HRA
Employer & Employee Contribution to your EPF
Conveyance allowance
Calculations of various salary components –
Basic Salary = 50% * 12 Lac = INR 6 Lac [The Basic salary is typically 50% to 55% of your CTC. We are taking 50% for ease of calculation.]
Employer’s Contribution to PF = 12% of your Basic Salary — 12% * 6 Lac = INR 72,000/-
Employee’s Contribution to PF = 12% of your Basic Salary — 12% * 6 Lac = INR 72,000/-
House Rent Allowance (HRA) = Usually 30% of Basic = 30% * 6 Lac = INR 1,80,000/-
Conveyance Allowance = Usually INR 1600/- per month = 1600 * 12 = 19,200/- for a complete year
Exgratia = CTC — Sum of above components = 12 Lac — 9.432 Lac = INR 2,56,800/—
Look at the below table for the summary of the above salary package components (CTC – INR 12 lakh)
Salary Components
Brief Description
Yearly Amount (INR)
Basic Salary
Typically 50% of your CTC
6,00,000/-
Employer’s Contribution to PF
12% of your Basic Salary
72,000/-
Employee’s Contribution to PF
12% of your Basic Salary
72,000/-
House Rent Allowance (HRA)
Usually 30% of Basic
1,80,000/-
Conveyance Allowance
Usually INR 1600/- per month
19,200/-
Exgratia
Rest part of your salary
2,56,800/-
Total CTC(INR)
Sum of abovecomponents
12,00,000/-
*Note – Typically, government employers and their employees are not obligated to contribute to the Provident Fund (PF), whereas, it is mandatory for private companies. Conversely, government employers and their employees must contribute to the National Pension Scheme (NPS) at a rate of 10% to 14% of their Basic salary, whereas, private employees are not required to do so.
Now, Taxable Income = CTC — Standard Deduction – Employer’s Contribution to PF/NPS — Actual incurred Conveyance (Typically, To & fro travel to office cost)
Standard Deduction as per New Tax Regime 2024-25 has been increased from INR 50,000 to INR 75,000/-
Actual incurred Conveyance cost – Say INR 19,200/-
Approx. INR 83.50k per month will be your In hand salary (Take Home Salary) if your CTC is INR 12 lakhs.
Conclusion
With this guide, anyone can easily understand how to calculate their In hand salary from their CTC. We’ve provided a breakdown of salary calculations for the In hand salary salary under the New Tax Regime. However, it’s advisable to also compare the applicable income tax if you choose the Old Tax Regime to determine potential tax savings or you can consult your financial advisor.
If you still have any questions about calculating your In hand salary from your CTC, feel free to leave your queries in the comments section below.
