Your take-home salary breakup explained using memes

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“INR xxxxx credited to a/c no. xxx6789 on 31/03/22. Info-Payment SALARY. Avl Balance INR xxxxxx.” 

Tell me a better feeling than this?  I’ll wait for an answer.

If you’re in your first job, then the feeling of receiving your first salary is unmatched! But picture a situation where you’ve gotten lesser than expected. Your first instinct is to look for your take-home salary breakup and see where the math went wrong. 

Here’s what I mean:

Let’s say your CTC is ₹6L per annum, you’d expect ₹50,000 to be your in-hand salary; instead, you got lesser right?

This math is trickier than you can expect. Your take-home salary breakup isn’t all that hard to understand if you just go through the fine print on your offer letter.

What’s the importance of understanding my take-home salary breakup?

The foremost advantage of understanding your salary breakup is that it helps you realise if your CTC is extra inflated. This can happen if the components are disproportionately higher than your basic salary. Most employers put a cap of 40% on the basic salary compared to the overall CTC for non-metro cities and 50% for the metros, but there’s no actual rule written in stone for this. Secondly, understanding this breakup will help you negotiate more pertinent aspects of your particular needs and requirements.

Did you check the components of your CTC?

CTC, as the name suggests, is the overall cost of my service borne by my employer. While it is different for different companies and organisations, in my case, it includes components like-

  • Basic Salary
  • Provident Fund (PF)
  • Retirals such as Pension
  • House Rent Allowance (HRA)
  • Leave Travel Allowance (LTA)
  • Medical Allowance
  • Conveyance Allowance
  • And, the dreaded Income Tax

In my previous job, it also included components of Entertainment Allowance, Dearness Allowance (DA), Work From Home Furniture Allowance, Company Performance Linked Incentive etc. And not all of it was payable monthly; some components were paid quarterly or even annually.

On the other hand, my take-home salary is the net pay I receive minus all the deductibles like taxes, PF, and other retirals. Since all components may not be paid out each month, my monthly take-home differs for different months of the year. 

But why is my take-home salary less than my CTC?

It is not uncommon to hear people comparing their annual salary package to a swollen bag of potato chips, which has a handful of actual chips but lots of air for inflation when opened. However, this disgruntlement might be misplaced upon calculation-based consideration. Now, life would have been a lot simpler and more enjoyable if I could simply divide my CTC by 12, which would be my take-home salary. Also, if there were actual unicorns and Sachin Tendulkar could bat for India till he was 100 years old. Wishful Thinking! 

To put it simply, your take-home or net salary is almost always likely to be less than the CTC due to several deductions that occur according to government guidelines or sometimes even company policies. Let me explain with an example.

How to calculate your take-home salary?

A high CTC may appear great, but if it results in a low net salary per month, then you need to reconsider the situation. By properly calculating your take-home salary and putting in place all the respective CTC components, you can become empowered for future negotiations. 

The traditional formula for this is

Net Salary = CTC – Deductibles & Retirals (Professional Tax + Provident Fund + Income Tax + Gratuity + Pension + Variable)*

* In the modern corporate setup, the CTC may also include a percentage amount as a variable that is paid out quarterly or annually. Most realists, like me, prefer to not include such variable amounts as part of take-home salary due to the, well, variability of its payment.

Here is a table of a sample CTC breakup to further illustrate the calculation of take-home salary.


Amount Monthly

Amount Annually

Basic Salary (Include Dearness Allowance if any)



House Rent Allowance



Provident Fund (Employer's Contribution)



Conveyance Allowance



Medical Allowance



Leave Travel Allowance



Meal Vouchers e.g. Sodexo/Food cards



Special Allowance









Total CTC



Now, as per the CTC (fixed) the monthly take-home salary should be ₹94,700. However, using the formula mentioned earlier and deducting all the relevant components (PF, Gratuity, TDS etc.), the actual take-home becomes ₹77,466 per month. This amounts to a Take Home to CTC ratio of around 82%. If this ratio drops to below 75, it warrants a careful rethinking of your current salary structure.

Speaking of deductions, what is TDS?

It may not be a far stretch to compare TDS (Tax Deducted at Source) with Thanos. Like any other supervillain, TDS strikes at the heart of your livelihood and takes away a big chunk of it. TDS is a financial obligation by the employer and is deducted based on your individual income tax rate or slab, which is then deposited with the government. In this case, form 16 is the one-stop document that contains all the details of payments made and total deductions for and on your behalf in the financial year.

And what about PF?

This is the next item you’ll find in the deductions section of your salary slip. Provident Fund, PF, is like the wise old uncle you may not always like, yet makes a lot of sense. While it is an amount that is deducted from your monthly salary at 12% of your basic salary, it is deposited on your behalf in your EPFO (Employee Provident Fund Organisation) account. With the power of compound interest in excess of 8% per annum, you can hope to build a sizable retirement corpus over the course of time.

I, on my part, also indulge in VPF (Voluntary Provident Fund) and encourage others to do as well. This contribution is over and above the PF deduction as part of your CTC. The advantage of this investment is low risk, decent interest rates, one account to track, and no requirement of extra documents during the annual Income Tax proof submission.

And do we get any employee benefits?

Yes! While monetary benefits rule, not everything beneficial needs to be tangible. Most companies offer different sorts of benefits for the well-being of their employees. Some of these can be in the form of:

  • Group Medical Insurance for self and dependents
  • Free Access to online healthcare apps and services
  • Reimbursable Benefits like HSIA wifi connection, UPS or ergonomic chairs for efficient WFH, petrol or travel expenses etc.
  • Option to Purchase Company Stock via ESOPs (Employee Stock Ownership Plan), RSUs (Restricted Stock Units), or Employee Stock Purchase Plan (ESPP)

So now you know why there is a lesser in-hand salary  than you think and why it’s important know the reasons. The next time you discuss CTC and salary with any prospective employer, keep my friend Bernie’s message in mind.


How do I calculate my take-home pay from my salary?

Your take-home salary is essentially subtracting the following 4 components from your gross salary:

  • Income tax
  • PF contribution
  • Professional tax

You’ll be able to find the exact amounts for each of these on your offer letter or your monthly pay slip. 

Is CTC the same as take-home salary?

CTC and take-home salary are different. CTC stands for Cost to Company. This is how much it costs your employer to hire you, although the amount of money you may actually get will depend on the income tax slab you fall under (if you’ve opted for the Old Tax Regime) and various deductions like your PF contribution, and professional tax. Generally, while negotiating your salary in a new job, the recruiting manager usually tells you your salary in terms of CTC, and not how much you’ll actually get in-hand. This is why it’s essential to work out your take-home pay before deciding to take a job offer or not.

What are the components of salary breakup?

Most salary structures typically have the following components:

  • Basic salary: this is usually about 35% of your total compensation. 
  • HRA or House Rent Allowance: This is the money your company is paying you to cover your rent expenses
  • LTA or Leave Travel Allowance: This component of your salary is given to you to cover expenses incurred when you travel on leave
  • PF or Provident Fund: This is mandated by the government, and requires both you and your employer to make this contribution. This amount is tax deductible under the 80C section of the Income Tax Act.
  • Professional Tax: This is collected by the state government, and has a cap of ₹2500

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