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A worked walkthrough of how basic salary, HRA, allowances, employer PF and gratuity provisioning add up to CTC — with a full example.
CTC isn't one number pulled from a hat — it's built up from specific components, each calculated on its own basis. Understanding how those components stack means you can sanity-check any offer letter, or reverse-engineer what your own CTC should look like for a target take-home salary.
Take an illustrative annual CTC of ₹9,00,000. A typical structure might break down as follows (exact percentages vary by employer):
| Component | Basis | Annual amount (illustrative) |
|---|---|---|
| Basic salary | 45% of CTC | ₹4,05,000 |
| HRA | 50% of basic (metro) | ₹2,02,500 |
| Special allowance | Balancing figure |
Free Salary & CTC Calculator
Break down a CTC into Basic, HRA, PF, ESI, Professional Tax and Net Take-Home Pay, with an optional New Tax Regime income tax estimate — no signup required.
What's a typical basic salary as a percentage of CTC?
There's no single legal percentage, but 40-50% of CTC is a commonly used range for basic salary in Indian pay structures, since basic salary also drives HRA, PF and gratuity calculations. The exact split is set by each employer's compensation policy.
Does CTC include income tax?
No. CTC is calculated before any income tax is applied. Income tax (TDS) is deducted from your salary after CTC has already been converted into gross and net pay — it doesn't change the CTC figure itself.
Salary & Payroll
Salary vs CTC: What's the Difference?
CTC, gross salary and take-home salary are three different numbers on the same offer letter — here's what each one actually means and why they don't match.
Salary & Payroll
How to Calculate Take-Home Salary in India
Take-home salary is gross salary minus PF, ESI, professional tax and income tax — here's how each deduction is worked out, with an example.
| ₹1,27,860 |
| Employer PF contribution | 12% of PF wages (subject to the applicable wage ceiling) | ₹43,200 |
| Gratuity provisioning | ~4.81% of basic salary (standard actuarial approximation) | ₹19,480 |
| Employer ESI contribution (if applicable) | 3.25% of gross, only where ESI-eligible | ₹1,960 |
| Total CTC | — | ≈ ₹9,00,000 |
This table is illustrative, not a fixed formula — the exact percentages for basic, HRA and allowances are set by each employer's own compensation structure, and components like ESI only apply where the employee's gross wages fall within the ESI wage ceiling. Treat this as a worked example of the method, not a universal template.
Gross salary, in this example, is CTC minus the employer's own contributions and provisioning (employer PF, gratuity, employer ESI) — the components you never receive as monthly cash. From there, your own deductions (employee PF, ESI where applicable, professional tax, and income tax/TDS) bring you down to net/take-home salary. The companion articles in this series — Take-Home Salary and PF/ESI/Professional Tax — walk through each of those deduction steps in detail.
A well-structured offer letter should itemize each CTC component rather than showing a single lump-sum number. That breakup is what lets you estimate your actual take-home pay before accepting an offer, rather than being surprised by your first payslip. If you're the one issuing offer letters, showing this breakup clearly also sets the right expectations for a new hire from day one.
Rather than building this breakdown by hand in a spreadsheet, running your numbers through a calculator that applies the current PF, ESI and gratuity conventions is faster and less error-prone.