- In India, take-home (in-hand) pay is gross salary minus employee EPF, TDS, and professional tax. It usually lands at 70-82% of CTC, and the percentage falls as income rises into higher tax brackets.
- Under the new tax regime, a ₹75,000 standard deduction and ₹60,000 Section 87A rebate make salaried income up to about ₹12.75 lakh effectively tax-free for tax year 2026-27.
Estimate in-hand pay for any CTC with our free India Salary Calculator.
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For US companies hiring in India, the gap between the CTC on an offer letter and what actually reaches an employee's bank account is the single biggest source of payroll surprises. Take-home pay is the figure both sides care about, and it always lands well below CTC.
This guide explains how take-home pay is calculated from CTC in India, which deductions reduce it, and how the 2026 tax and Labour Code rules change the math.
What is the difference between CTC, gross salary, and take-home pay in India?
CTC is the total annual cost to the employer. Gross salary is CTC minus employer-side contributions like employer EPF and gratuity. Take-home pay, or net salary, is gross salary minus employee deductions. CTC is always the highest figure and take-home the lowest.
- CTC: the full cost an employer bears, including employer EPF, gratuity accrual, and benefits. This is the number quoted on the offer letter.
- Gross salary: CTC minus employer statutory contributions. This is the taxable figure shown on the payslip before deductions.
- Take-home pay: gross salary minus employee EPF, TDS, and professional tax. This is what lands in the bank, typically 70% to 82% of CTC.
For how each CTC component is built and the 50% basic rule, see our guide on salary structure in India.
How is take-home pay calculated from gross salary in India?
Take-home pay equals gross salary minus total employee deductions. The work is in calculating each deduction correctly. Start from CTC, remove employer contributions to reach gross salary, then remove employee EPF, TDS, and professional tax to reach net pay.
The steps look like this:
- Start with annual CTC from the offer letter and set aside any variable pay or bonus.
- Subtract employer contributions (employer EPF and gratuity accrual) to reach gross salary.
- Subtract employee EPF (12% of basic salary), professional tax, and TDS from gross to get annual take-home, then divide by 12 for monthly in-hand pay.
To estimate in-hand pay for a specific CTC, use our free India Salary Calculator.
What deductions reduce your take-home pay in India?
Four deductions move money out of gross salary before it reaches the employee: employee EPF, income tax (TDS), professional tax, and, for lower-wage employees, ESI. Together they commonly reduce gross salary by roughly 15% to 25%, depending on income and structure.
- Employee EPF: 12% of basic salary each month, deposited to the employee's EPF account, which earns 8.25% for FY2025-26.
- TDS (income tax): deducted monthly based on projected annual income, the chosen tax regime, and declarations. It is usually the largest deduction for higher earners.
- Professional tax: a state levy capped at ₹2,500 per year. States like Karnataka, Maharashtra, and Tamil Nadu charge it; several states do not.
- ESI: 0.75% of wages from the employee where gross is ₹21,000 a month or less, with the employer adding 3.25%.
How does the tax regime affect take-home pay in 2026?
The new tax regime is the default and usually gives higher take-home for employees who do not claim many exemptions. It offers a ₹75,000 standard deduction, and a ₹60,000 rebate under Section 87A makes taxable income up to ₹12,00,000 tax-free, so salaried income up to about ₹12,75,000 is effectively tax-free.
The slab rates under the new regime for tax year 2026-27 (unchanged in Budget 2026) are:
- Up to ₹4,00,000: nil
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- ₹12,00,001 to ₹16,00,000: 15%
- ₹16,00,001 to ₹20,00,000: 20%
- ₹20,00,001 to ₹24,00,000: 25%
- Above ₹24,00,000: 30%
The old regime can still give higher take-home for employees with significant HRA, home loan interest, or 80C deductions. The Income Tax Act 2025, in force from April 1, 2026, replaces the 1961 Act but did not change these slab rates or the standard deduction.
How do the 2026 Labour Codes change take-home pay?
The Code on Wages requires basic salary plus dearness allowance to be at least 50% of CTC. A higher basic raises both employee and employer EPF and gratuity, which slightly lowers monthly take-home while increasing retirement savings. Total CTC does not change.
The Labour Codes were notified effective November 21, 2025, with enforcement rolling out from April 1, 2026 as states finalise their rules. An employee whose basic was previously below 50% of CTC may see a modest dip in monthly in-hand pay once their structure is updated.
How can employers improve take-home pay without raising CTC?
Within the law, the way CTC is split changes net pay at no extra employer cost. The biggest levers are HRA for employees who pay rent, tax-exempt reimbursements, and employer contributions to the National Pension System, which are deductible up to 14% of basic salary under the new regime.
- HRA: for employees in rented housing on the old regime, a well-set HRA component can be partly tax-exempt, raising net pay.
- Reimbursements: allowances paid as documented reimbursements, for example fuel or communication, can be structured tax-efficiently with valid proof.
- Employer NPS: employer contributions to NPS are tax-free up to 14% of basic salary under the new regime, a major permitted deduction.
If you would rather not run this math every month, see how fully managed payroll in India handles gross-to-net, deductions, and filings for you.
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Frequently asked questions
How much of CTC is take-home pay in India?
Take-home pay in India is usually 70% to 82% of CTC. The gap comes from employer contributions that sit inside CTC but never reach the employee, plus employee deductions like EPF, TDS, and professional tax. The percentage falls as income rises into higher tax brackets.
How is take-home salary calculated from CTC in India?
Subtract employer EPF and gratuity from CTC to get gross salary, then subtract employee EPF (12% of basic), TDS, and professional tax to reach annual take-home. Divide by 12 for monthly in-hand pay. A salary calculator automates this once you enter the CTC.
What deductions are taken from salary in India?
The main deductions are employee EPF at 12% of basic salary, income tax deducted at source (TDS), and professional tax capped at ₹2,500 a year. Employees earning up to ₹21,000 a month also have ESI deducted at 0.75% of wages.
Does the new tax regime increase take-home pay in India?
For many salaried employees, yes. The new regime gives a ₹75,000 standard deduction and a ₹60,000 Section 87A rebate, making income up to ₹12,75,000 effectively tax-free. Employees with large HRA or 80C claims may still take home more under the old regime.
Do the 2026 Labour Codes reduce take-home pay?
They can slightly. The Code on Wages requires basic to be at least 50% of CTC, which raises employee EPF and gratuity and modestly lowers monthly in-hand pay, while increasing retirement savings. Total CTC stays the same. If basic was already 50% or more, nothing changes.
Is take-home pay the same across Indian states?
No. Professional tax is set by each state and capped at ₹2,500 a year, and some states do not levy it at all. Minimum wages also vary by state and role, so the same CTC can produce slightly different take-home pay in different states.
What is the difference between gross salary and take-home pay in India?
Gross salary is CTC minus employer contributions and is the figure income tax is calculated on. Take-home pay is gross salary minus employee deductions such as EPF, TDS, and professional tax. Take-home is always lower than gross, which is in turn lower than CTC.
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