Question 1

What is CTC?

Accepted Answer

CTC (Cost to Company) is the total annual expense an employer incurs for an employee. It includes all direct pay (basic, HRA, special allowance), employer PF contribution, gratuity provision, insurance, and any other benefits. CTC is NOT the same as take-home salary.

Question 2

How is take-home salary calculated from CTC?

Accepted Answer

Take-home = Gross Salary − Employee PF − Professional Tax − TDS (Income Tax). Gross salary itself = CTC − Employer PF − Gratuity − other employer-borne costs. The exact split varies by employer but a common structure is: Basic = 40–50% of CTC, HRA = 40–50% of Basic, Special Allowance = remainder.

Question 3

What is the Professional Tax?

Accepted Answer

Professional Tax is a state-level tax deducted from salary, ranging from ₹0 to ₹2,500 per year depending on the state. Maharashtra and Karnataka have the highest rates (₹200/month for salaries above ₹15,000). Some states like Delhi do not levy Professional Tax.

Question 4

What is the employer PF contribution?

Accepted Answer

The employer contributes 12% of basic pay (capped at basic of ₹15,000 for EPFO employees — so max ₹1,800/month) towards EPF. This is part of CTC but not received as cash salary. Employee also contributes 12% of basic (deducted from gross).

Question 5

How is HRA exemption calculated for private-sector employees?

Accepted Answer

HRA exemption = least of: (a) actual HRA received; (b) 50% of basic (metro) or 40% of basic (non-metro); (c) rent paid minus 10% of basic. If you live in a rented house, claim HRA exemption to reduce taxable income under the Old Regime.

Question 6

Old Regime vs New Regime — which is better?

Accepted Answer

The New Regime (FY 2025-26) has lower slab rates and is default, but disallows HRA, 80C, 80D deductions. The Old Regime allows deductions — beneficial if you have a large HRA, home loan, or 80C investments. This calculator uses the New Regime. Consult a tax advisor for your specific situation.

CTC Calculator

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