The number on your offer letter is not your salary. CTC — cost to company — is exactly what it says: everything your employer spends on employing you, including money you will not see for decades and some you may never see at all. The gap between CTC and the first month's bank credit routinely runs to 20–30%, and most of the shock is avoidable with ten minutes of arithmetic.
What sits inside a CTC
A typical CTC stacks four layers:
- Fixed cash — basic salary, HRA, and a catch-all "special allowance". This is the part that actually reaches your bank account, before deductions.
- Retirals — the employer's 12% EPF contribution and the gratuity provision (roughly 4.81% of basic — the accounting cost of the 15/26 formula below). Real money, but locked in schemes, not in your account.
- Variable pay — the bonus at "100% payout", which the offer letter assumes and the business cycle decides. Discount it before you commit to an EMI.
- Perquisites and padding — insurance premiums, meal cards, occasionally even laptop depreciation. Employers differ wildly in how much of this they count, which is why two ₹20 lakh offers can pay very different amounts.
The CTC breakdown calculator turns an offer letter into the monthly in-hand figure, and the salary calculator works the other direction.
Where the deductions go
EPF takes 12% of basic from you, and your employer adds 12% more — but the employer's side is split. 8.33% is diverted to the EPS pension pool, capped at 8.33% of a ₹15,000 wage ceiling (₹1,250 a month); above that basic, the excess lands back in EPF. Interest accrues monthly and is credited once at year end, at a rate the government revises annually. Over a career this quiet 24% of basic, compounding tax-free, is most salaried Indians' largest asset after their home — run it forward with the EPF calculator, and see the magic of compounding for why the early years matter most.
Gratuity vests only after five years of continuous service: 15 days of last drawn salary per year of service (the 15/26 formula), capped at ₹20 lakh. Service beyond six months in the final year rounds up to a full year. The gratuity calculator does the arithmetic.
TDS on salary is your income tax, collected monthly by payroll against the regime you pick — the single biggest lever on in-hand pay, covered in choosing your tax regime. Professional tax, where your state levies it, takes a small fixed bite.
The structure games
Because HRA exemption (old regime only) and EPF both key off basic, employers and employees quietly negotiate its share. A low basic raises in-hand cash today and shrinks EPF, gratuity and HRA exemption; a high basic does the reverse. There is no universally right split — but there is a right question, which is whether you are choosing it or merely accepting a template. The HRA calculator shows what your rent actually exempts.
⚠️ Slab rates, the EPF ceiling, and gratuity limits are statutory values that budgets and notifications revise. Verify current figures before relying on them — and treat this as arithmetic, not tax advice; WealthTicker is not a SEBI-registered investment adviser.
Key takeaway
CTC is what employing you costs, not what you are paid. Strip out the retirals and the assumed bonus before comparing offers, know that EPF plus gratuity is real wealth on a long fuse rather than a deduction, and check the basic-salary split — it silently sets your EPF, your gratuity and your HRA exemption at once.
More in Module 11 — Money beyond funds: salary, tax, loans and property
Old vs new tax regime: the choice that decides everything else
The new regime is the default and usually the winner — but not always. Where the break-even sits, why the §87A rebate never touches capital gains, and why the regime decides whether ELSS, HRA and 80D planning are worth anything at all.
Advance tax and TDS: how India collects before you file
TDS is a running prepayment, not the final bill, and advance tax fills the gap in four dated instalments. The 15/45/75/100 calendar, the cliff in the early triggers, and the presumptive shortcut that collapses it to one March payment.
ESOPs, RSUs and ESPPs: taxed twice, at two different prices
Slab tax on the discount when shares become yours, capital gains from that day's FMV when you sell. Why tax can fall due on paper value, and why the cost-basis error is the most common mistake in self-filed returns with equity comp.
Freelancing full-time: the 50% deal most professionals miss
Presumptive taxation lets a qualifying professional declare half of gross receipts as profit — no books, no audit, one advance-tax instalment. How the scheme works, and how to compare a salary and a freelance offer honestly.
How an EMI actually works (and the flat-rate trick)
Interest on the outstanding balance first, principal with the remainder — so early years barely repay anything. Why tenure sets total interest, why early prepayment punches above its weight, and why a flat rate is roughly double what it claims.
A surplus and a loan: prepay, refinance or invest?
Prepayment is a guaranteed, tax-free return equal to your loan rate — cut the tenure, not the EMI. When a balance transfer clears its fees, and when investing the surplus honestly beats both.
Rent vs buy: the honest math
Terminal net worth on two fully-specified paths, with the renter investing every rupee the buyer sinks. The two assumptions that decide the answer, and the tax change that flipped older calculators' verdicts.
The small savings family: PPF, SSY, NSC, KVP, SCSS and kin
One sovereign family, priced quarterly. Which schemes compound, which pay income, which are tax-exempt — and why the after-tax yield, not the poster rate, is the number to compare.
Insurance is not an investment: term plans and the LIC question
Bundled policies do both jobs badly. Sizing a term cover from needs rather than folklore, and evaluating an endowment you already own on forward numbers alone — surrender, paid-up or continue.
What trading actually costs: beyond zero brokerage
STT, exchange charges, GST, stamp duty and DP fees stack on every trade no broker can waive. The break-even move to know before a trade, the averaging-down trap, and what leverage really multiplies.
Running a small business by the numbers
Break-even and the margin of safety, margin versus markup, the cash conversion cycle, the DSCR a lender will compute anyway, and GST as an input-credit chain — the five checks that catch trouble early.