A salary offer letter can be confusing — CTC, gross, net, basic, HRA, allowances and deductions all appear. Understanding each helps you compare offers and plan taxes.
This guide breaks down the components of an Indian salary.
What is Salary Components Explained?
CTC (Cost to Company) is the total the employer spends, including employer PF and benefits. Gross salary is CTC minus employer contributions. In-hand (net) salary is gross minus employee PF, professional tax and TDS.
Basic salary drives PF, HRA and gratuity calculations.
From CTC to in-hand
| Term | Meaning |
|---|---|
| CTC | Total employer cost including benefits |
| Gross salary | CTC minus employer PF/benefits |
| Deductions | Employee PF, professional tax, TDS |
| In-hand/net | Gross minus deductions |
Frequently asked questions
Why is my in-hand salary less than my CTC?
CTC includes employer contributions (like PF) and your own deductions (PF, professional tax, TDS), which reduce what reaches your bank account.
Why does basic salary matter?
Basic salary is the base for PF, HRA exemption and gratuity, so a higher basic affects several calculations.