What percentage of CTC should Basic Salary be?

Historically companies set Basic at 30-40% of CTC to minimise statutory PF and Gratuity obligations (both are computed as a % of Basic). The Labour Code on Wages, effective April 2026, mandates Basic Salary be at least 50% of total wages — so most companies are now restructuring CTCs with Basic at 50% of CTC. A higher Basic increases your PF and Gratuity (good for retirement savings) but reduces in-hand pay because Employee PF and TDS also rise.

How does the Labour Code 50% Basic rule affect take-home?

When Basic moves from 40% to 50% of CTC, several things change: Employer PF (12% of Basic) and Gratuity provision (4.81% of Basic) both rise — these come out of CTC but go to separate accounts, so headline CTC stays the same but the cash-paid portion shrinks. Employee PF also rises (12% of higher Basic), reducing your monthly in-hand by ~₹1,500-₹3,000 depending on income. The trade-off: more locked retirement savings, slightly less monthly cash. Many companies are restructuring CTCs upward to absorb this so net in-hand stays flat.

Does PF reduce my in-hand salary?

Yes — the Employee PF contribution (12% of Basic) is deducted from your monthly gross before take-home is computed. On a ₹15 Lakh CTC with 50% Basic, Employee PF is ₹90,000/year (~₹7,500/month) — reducing your monthly in-hand by exactly that amount. The Employer PF (another 12% of Basic) is part of CTC but goes straight to your EPF account, not your bank. Both contributions together build your retirement corpus and earn ~8.25% annual interest, withdrawable at retirement (or with conditions earlier).

CTC vs Total Annual Compensation (TAC)?

CTC (Cost to Company) is the standard headline number used in Indian offer letters — it includes Basic + HRA + LTA + Special Allowance + Variable + Employer PF + Gratuity + Insurance. TAC (Total Annual Compensation) is a broader term often used by tech / MNC companies that additionally includes Employee Stock Options (ESOPs / RSUs) vested in that year, retention bonuses, joining bonus, and any non-cash perks (laptop, meal vouchers, gym). For a typical mid-senior IT role, TAC is often 1.2-2x of headline CTC once RSUs vest. Always ask for both numbers when negotiating.

CTC Breakdown Calculator — Salary Structure & In-Hand

CTC Breakdown

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CTC Breakdown Calculator

Break down annual CTC (Cost to Company) into Basic / HRA / LTA / Special Allowance / Bonus / Variable Pay / Employer PF / Gratuity Provision / Insurance. Also supports reverse-salary mode: enter desired in-hand and get required CTC.

Reviewed by the CalculatorKosh Editorial TeamUpdated June 2026Free · No sign-up

Calculation Mode

Mode

Annual CTC

₹

₹0₹1000 Cr

(15.0 Lakh)

City Type

Basic % of CTC

35%55%

= ₹7,50,000/yr

Variable Pay %

0%30%

= ₹1,50,000/yr

Tax Slab (new regime)

Monthly In-hand

₹1,06,285

Annual in-hand: ₹12,75,425After PF + PT + TDS

CTC

₹15.0 L

Annual Gross

₹13.7 L

Net Annual

₹12.8 L

Take-home %

85.0%

Full CTC Breakdown

Basic Salary	₹7,50,000
HRA (metro 50%)	₹3,75,000
LTA	₹62,475
Special Allowance	₹30,450
Variable Pay	₹1,50,000
Employer PF	₹90,000
Employer Gratuity provision	₹36,075
Insurance premium	₹6,000
Total CTC	₹15,00,000

CTC Composition

Basic Salary₹7,50,000

HRA₹3,75,000

LTA₹62,475

Special Allowance₹30,450

Variable Pay₹1,50,000

Employer PF₹90,000

Gratuity provision₹36,075

Insurance₹6,000

Deductions from Gross

Employee PF (12% of Basic)	₹90,000
Professional Tax	₹2,500
Estimated TDS	₹0

Labour Code 50% Basic rule

From April 2026, the new Labour Code mandates Basic Salary be at least 50% of total wages. This shifts more income to PF (12% of Basic) + Gratuity (4.81% of Basic) — meaning higher CTC, lower in-hand for the same gross. Companies are restructuring CTCs to comply.

Reverse mode use case

Use reverse mode to negotiate offers — given your desired in-hand (after tax + PF), what CTC should you ask for? Toggle Mode → Reverse above and enter your target monthly take-home.

Take-Home Salary Calculator

Full slab-aware in-hand pay with old / new regime side-by-side.

Income Tax Calculator

Slab-by-slab tax computation with 87A rebate and surcharge.

How It Works

The headline CTC in your offer letter bundles monthly cash pay with employer-funded benefits — Employer PF (12% of Basic), Gratuity provision (4.81% of Basic), and a group insurance premium — that never reach your bank account. This calculator breaks the CTC into every typical IT / MNC component and computes the monthly in-hand pay after deductions.

Forward mode — CTC to components

Enter your annual CTC and the structural %-splits your employer uses (Basic % of CTC, Variable Pay %). The calculator derives Basic, HRA (50% of Basic for metro / 40% for non-metro), LTA (~1 month of Basic), Variable Pay, Employer PF, Gratuity, Insurance and the Special Allowance residual that balances the CTC equation. It then computes the in-hand-eligible Gross, deducts Employee PF + Professional Tax + estimated TDS, and shows monthly take-home.

Reverse mode — in-hand to CTC

Use reverse mode while negotiating an offer: enter your desired monthly take-home and the calculator solves for the CTC that would produce it, given the same structural splits. Handy when you know the in-hand number you need but the recruiter asks for an expected CTC.

Labour Code 50% Basic rule

From April 2026 the new Labour Code on Wages mandates Basic Salary be at least 50% of total wages. This shifts more income into PF (12% of Basic) and Gratuity (4.81% of Basic) — boosting your retirement corpus but slightly reducing monthly in-hand for the same gross. Most companies are restructuring CTCs to comply.

Frequently Asked Questions

CTC (Cost to Company) is the total annual cost the employer incurs to employ you — it bundles your monthly pay with employer-funded benefits (Employer PF, Gratuity provision, Insurance premium) that never reach your bank account.

Gross is the in-hand-eligible portion: Basic + HRA + LTA + Special Allowance + Variable Pay, before any deductions.

In-hand (take-home) is what actually lands in your bank each month after Employee PF (12% of Basic), Professional Tax, and TDS are deducted from gross.