CTC Offer Optimizer
You have a fixed budget for an India hire. This works out how to split it so the employee keeps the most — and, more often than you'd expect, tells you that the split barely matters and your offer needs a bigger number instead.
This is not a take-home calculator. If you want to know what a given CTC pays out, use the salary calculator. This tool works the other way round: it holds your employer cost fixed and searches for the best structure inside it.
Inputs
The budget and the employee
Employer cost is the full annual amount you're willing to spend, including statutory contributions — not the headline salary. The employee's circumstances decide whether the old tax regime is worth opting into.
Everything you pay: salary plus PF, gratuity, NPS. Floored at ₹3,00,000.
Sets professional tax and HRA metro status
The single biggest driver of take-home
0 if they own or live with family
Beyond their PF. Capped at ₹1,50,000
Capped at ₹25,000 here
Self-occupied. Capped at ₹2,00,000
The only major deduction that survives the new tax regime. Some payroll setups don't support it.
Cleared the Finance Ministry in August 2026 but not yet law — Cabinet approval and gazette notification are both pending.
Exhibit 1
Two ways to spend the same budget
Employer NPS always reduces spendable pay, because the money leaves salary and goes into a locked retirement account. So there is no single "best" structure — there is a cash answer and a total-value answer, and which one wins depends on the candidate in front of you.
Maximise spendable cash
Maximise total value
cash plus retirement, a yearMaximise total value
Exhibit 2
What each lever is actually worth
Every lever valued on its own, in rupees per year, against this package. The two levers employers spend the most time arguing about — the basic-pay split and how components are labelled — are usually the two that move nothing.
Component relabelling — special allowance, conveyance, "flexi" buckets — is absent from this list because on the new regime it is worth exactly nothing. None of those components is exempt any more.
Exhibit 3
Why lowering basic pay stopped working
Employers used to set basic low so that PF, gratuity and bonus were computed on a smaller number. Section 2(y) of the Code on Wages ended that: if the allowances you exclude from wages exceed half of total remuneration, the excess is added back and treated as wages anyway. Here is the same budget at six different basic percentages.
| Basic as % of gross | Deemed add-back | Take-home a year | Difference |
|---|---|---|---|
Exhibit 4
The offer, component by component
The recommended structure written out as it would appear on an offer letter and in your cost model. Employer cost reconciles to your budget exactly.
| Component | Basis | Per year |
|---|---|---|
| Basic salaryyou set it | ||
| House rent allowanceyou set it | ||
| Special allowanceyou set it | balance of gross | |
| Gross salary | ||
| Employer PFstatutory | ||
| EDLI + PF adminstatutory | 0.5% + 0.5% | |
| Gratuity provisionstatutory | 4.81% of statutory wage | |
| Employer NPSstatutory | ||
| Employer ESIstatutory | 3.25% (gross under ₹21,000/mo) | |
| Total employer cost |
| Employee deductions | Basis | Per year |
|---|---|---|
| Employee PFstatutory | ||
| Employee ESIstatutory | 0.75% | |
| Professional taxstate rate | ||
| Income taxstatutory | ||
| Take-home |
Old-regime deductions applied
Exhibit 5
Retirement-contribution ceiling
Employer PF, NPS and superannuation are tax-free to the employee only up to ₹7,50,000 a year in aggregate. Above that, Section 17(2)(vii) makes the excess a taxable perquisite — the employee is taxed on money they cannot touch until retirement. Almost no salary calculator surfaces this, and it bites on senior packages.
Scenario
Modelled on the proposed ₹25,000 PF ceilingnot yet law
The Finance Ministry cleared raising the EPF wage ceiling from ₹15,000 to ₹25,000 a month in early August 2026, and press reports point to 1 April 2027. Cabinet approval and gazette notification are both still outstanding, and the effective date is journalistic expectation rather than policy. Treat this as a planning scenario, not the current position.
What this is built on
- Where the numbers come from. Income tax slabs, the ₹75,000 standard deduction and the ₹60,000 Section 87A rebate are for FY 2026-27 (AY 2027-28); Union Budget 2026 left the Budget 2025 slabs unchanged. Employer NPS is deductible under Section 80CCD(2) up to 14% of basic plus DA on the new regime, 10% on the old. Aggregate employer PF, NPS and superannuation above ₹7,50,000 a year is a taxable perquisite under Section 17(2)(vii). EPF wage ceiling is ₹15,000 a month, unchanged since September 2014. Gratuity is provided at 4.81% of the statutory wage. ESI applies where monthly gross is ₹21,000 or below. Professional tax is capped at ₹2,500 a year by Article 276 and is modelled as a flat annual figure per state, which is accurate at these salary levels because every levying state sits at its ceiling well below them.
- The 50% wage rule. The four Labour Codes took legal effect on 21 November 2025 and central rules were notified on 8–9 May 2026, though state rules remain uneven. Under Section 2(y) of the Code on Wages, components excluded from "wages" cannot exceed 50% of total remuneration; any excess is treated as wages for PF, gratuity, bonus and leave encashment. This tool models that add-back, which is why lowering basic pay no longer lowers your statutory cost.
- What this does not do. It does not model variable pay or bonuses, leave travel allowance (whose exemption depends on real travel against real tickets, so any assumed claim rate would be invented), reimbursement-based flexi components, ESOPs, or the employee's non-salary income. It assumes a full 12-month year with no mid-year joining. It is general information for budgeting an offer, not tax advice — the employee's regime choice is theirs to make and worth checking with a chartered accountant.
Want this run against your actual offers?
We run India payroll for global companies and structure these packages daily, including the regime conversation with the candidate. Bring us the role and the budget.
