A ₹12,00,000 CTC offer doesn't mean ₹1,00,000 a month in your bank account. CTC (Cost to Company) includes several deductions before you see any of it — here's where the money actually goes.
Step 1: CTC splits into Basic, and everything else
Most companies structure salary as Basic (commonly 40-50% of CTC) plus allowances (HRA, special allowance, etc.) plus the employer's own contributions (PF, gratuity provision). Basic pay matters most because PF contributions are calculated from it.
Step 2: Provident Fund — twice
Both you and your employer contribute 12% of Basic to EPF. Your employer's share is already inside your CTC number (it's a cost to the company, not cash to you), so it needs to be subtracted to get your actual gross pay. Your own 12% share is then deducted again from that gross pay before you receive it.
Step 3: Income tax and professional tax
After PF, your employer estimates your annual income tax (based on your salary and any declarations you've submitted) and deducts it monthly as TDS. Most states also deduct a small professional tax, typically ₹200/month.
A worked example
For a ₹12,00,000 CTC with Basic at 50% (₹6,00,000/year):
- Employer's PF share: ₹72,000/year — subtracted from CTC to get gross pay of ₹11,28,000
- Employee's PF share: ₹72,000/year — deducted from gross pay
- Taxable income (after ₹75,000 standard deduction): ₹10,53,000 — under the new regime's ₹12,00,000 rebate threshold, so income tax is ₹0
- Professional tax: ₹2,400/year
Annual in-hand comes out to about ₹10,53,600 — or roughly ₹87,800 a month, against a CTC that implied ₹1,00,000/month. The gap is almost entirely PF, which you do get back eventually (with interest) when you withdraw it — it just isn't part of your monthly cash flow.
What changes this number
A higher Basic percentage means more PF (less in-hand now, more saved for later). A higher CTC pushes you past the ₹12,00,000 rebate threshold, at which point income tax starts eating into take-home pay too — and the reduction isn't small, since you exit the zero-tax zone entirely once taxable income crosses that line.
Calculate your own breakdown
The Salary to In-hand Calculator runs this exact breakdown for any CTC and Basic percentage. If you want to see how PF itself grows over your career, the EPF Calculator projects your provident fund corpus at retirement.