A 12-person design studio in Bengaluru is hiring a junior designer at ₹6,00,000 a year. The candidate asks the one question every candidate asks: what lands in the bank each month? It's less than ₹50,000, and the owner should be able to say by how much, and why, before the offer letter goes out.
CTC to in-hand salary, in four steps
- Split CTC into months. ₹6,00,000 ÷ 12 = ₹50,000.
- Take out what the employer pays on the employee's behalf. Employer PF is ₹1,800 (12% of Basic, on the ₹15,000 ceiling) and the gratuity provision is ₹1,202. Neither is paid monthly. What's left, ₹46,998, is the gross salary.
- Take out the employee's own deductions. Employee PF of ₹1,800; no ESI, because the gross is over ₹21,000; and Karnataka's professional tax, ₹2,500 a year, about ₹208 a month.
- Take out income tax. Under the new regime, this salary pays none. Under the old regime, with no deductions claimed, it's ₹1,283 a month.
₹50,000 a month of CTC, split
Basic₹25,000
HRA₹10,000
Special allowance₹11,998
Employer PF₹1,800
Gratuity₹1,202
₹46,998gross a month
₹44,990in hand, new regime
₹43,707in hand, old regime
Every figure above is from the engine behind the salary calculator, with Basic at 50% of CTC. Here's the same studio at three levels of pay:
| Annual CTC | Gross | In hand, new | In hand, old |
|---|
| ₹3,60,000 | ₹27,479 | ₹25,471 | ₹25,471 |
|---|
| ₹6,00,000 | ₹46,998 | ₹44,990 | ₹43,707 |
|---|
| ₹9,00,000 | ₹71,397 | ₹69,389 | ₹63,031 |
|---|
Basic salary percentage of CTC
Most Indian companies set Basic at 40% to 50% of CTC. Basic drives PF, gratuity and leave encashment, so a lower Basic looks cheaper on a CTC sheet. At 40% instead of 50%, this offer's take-home rises to ₹45,230, because the gratuity provision shrinks from ₹1,202 to ₹962. PF doesn't move, since both are above the ₹15,000 ceiling.
Before you lower Basic: since November 2025 the labour codes count allowances above half of pay as wages. A 40% Basic doesn't make the gratuity smaller when somebody leaves; it only makes the provision smaller while they're still with you. The
gratuity post works through the numbers.
For most small businesses, 50% of CTC is the simpler choice. It sits on the right side of the rule, and the gratuity provision then matches what an exit will cost.
HRA and special allowance
HRA is usually 40% of Basic, or 50% in the largest metros. Those are the figures the old regime's HRA exemption is capped at, which is why they became the habit. Under the new regime, which most employees now choose, HRA gets no exemption at all, so the split between HRA and other allowances matters less for tax than it used to.
The special allowance is the balancing figure: whatever is left of the gross once Basic, HRA and any fixed allowances are set. For the designer it's ₹11,998.
How to structure employee salary for a small team
- Pick one Basic percentage and use it for everybody. Different rules for different people is how a payroll sheet goes wrong.
- Decide whether PF is on the ₹15,000 ceiling or on full Basic, and say which in the offer.
- Say whether the CTC includes gratuity. Most do; if yours doesn't, the gross is higher.
- Watch anyone near ₹21,000 of gross. A raise that crosses it ends ESI for them, from the next contribution period.
- Put the monthly gross in the offer letter, beside the CTC, so nobody is surprised by the first payslip.
PF and ESI come with their own rules on who has to register and when. PF and ESI for a small business covers them.
