How to Read Your Salary Slip and Understand Your CTC

CTC is not your salary

The first thing to internalise is that the CTC on your offer letter is not what you take home. CTC — Cost to Company — is everything your employer spends on you in a year, including contributions and benefits you never receive as monthly cash. Your in-hand salary, after all deductions, is typically 65–80% of CTC. Knowing how the number shrinks from CTC to bank deposit is the difference between a budget that works and one that is always short.

The earnings side

• Basic salary: the foundation, usually 40–50% of CTC. PF, HRA and gratuity are all calculated from it.
• HRA (House Rent Allowance): a partly tax-exempt allowance if you pay rent.
• Special allowance: the flexible, fully taxable balancing figure that makes the total add up.
• Other allowances: LTA, conveyance, and similar, some with tax benefits.

Together these form your gross salary — the total before deductions. A payslip with a high basic means more goes into PF (good for retirement, lower monthly cash); a high special allowance means more take-home but less forced saving.

The deductions side

• Employee PF: 12% of basic, deducted from your salary — this is your own retirement money, not lost.
• Professional tax: a small state levy, commonly ₹200/month.
• TDS (income tax): deducted monthly based on your projected annual tax and chosen regime.
• Other deductions: any insurance or loan recoveries.

Separately, the employer's PF contribution and gratuity are part of your CTC but never appear as money you receive — they are the main reason CTC overstates your take-home.

Check your own numbers

Once you can read the slip, two checks are worth doing. First, confirm your in-hand matches expectations by running your CTC through the CTC calculator. Second, make sure your TDS lines up with the regime that is cheapest for you — many people overpay by staying on a default regime that does not suit their deductions; compare both in the income tax calculator. If you have just received a raise, the pay raise calculator shows how much of the headline increase actually reaches your account after tax.