CTC, Gross Salary, Basic Salary and Take-Home Pay Explained (Tax Year 2026-27)
CA Meet Dhrangadhariya 
June 12, 2026
CA Meet Dhrangadhariya June 12, 2026
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Last updated: 23 July 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
A job offer quotes a CTC, the payslip shows a gross salary, and the bank credit is much smaller. These terms are payroll language, not tax law, and employers use them a little differently. This post fixes the meaning of each, shows how they fit together, and explains what the Income-tax Act, 2025 calls salary.
| Term | Meaning |
|---|---|
| CTC (Cost to Company) | The total yearly cost of you to the employer: pay, allowances, variable pay, the employer’s PF contribution, the gratuity provision, insurance and other benefits |
| Gross salary | The pay credited or due to you before any deduction: basic, HRA, allowances, variable pay |
| Basic salary | The fixed core of gross salary, without allowances, bonus or perquisites |
| Take-home (net) pay | Gross salary less your PF contribution, professional tax, TDS and other deductions |
Gross salary is roughly CTC less the employer’s PF and the gratuity provision, because those are costs to the employer that you do not receive as monthly pay. Check your offer letter, since some employers show variable pay and benefits differently.
Under section 16 of the Income-tax Act, 2025, “salary” includes:
Tax is then charged on the net salary after the deductions in section 19: the standard deduction (₹75,000, or the salary if less, under the new regime; ₹50,000 under the old regime), professional tax (old regime only) and the retirement and exempt items such as gratuity.
Some payments in the CTC are not in your taxable salary at all. The employer’s contribution to a recognised provident fund, the notified pension scheme and an approved superannuation fund is a perquisite only to the extent the total is above ₹7,50,000 in a year (section 17(1)(h)).
Basic salary, together with dearness allowance if the terms of employment provide for it, is the base used for several things:
A low basic with a large special allowance cuts the PF and gratuity base and the HRA exemption, while a high basic increases all three but also raises your PF deduction and reduces your monthly take-home. Neither is right for everyone; there is no legal percentage of CTC.
CTC is ₹21,00,000 a year.
| Component | Amount (₹) |
|---|---|
| Basic | 8,40,000 |
| HRA | 3,36,000 |
| Special allowance | 6,32,800 |
| Variable pay | 1,50,000 |
| Gross salary | 19,58,800 |
| Employer’s PF (12% of basic) | 1,00,800 |
| Gratuity provision | 40,400 |
| CTC | 21,00,000 |
Tax under the new regime (section 202):
Take-home pay:
| Item | Amount (₹) |
|---|---|
| Gross salary | 19,58,800 |
| Less: employee’s PF (12% of basic) | 1,00,800 |
| Less: professional tax (assumed) | 2,400 |
| Less: income tax with cess | 1,83,830 |
| Take-home for the year | 16,71,770 |
| Per month | about 1,39,314 |
The employer’s PF and gratuity are outside gross salary but inside CTC, which is why take-home looks far below the headline figure.
Cost to Company. It is the total yearly cost of an employee to the employer: pay, allowances, bonus, employer’s PF, gratuity and any benefits.
CTC includes costs that are not paid to you as salary, such as the employer’s PF and the gratuity provision. Gross salary is what is paid to you before deductions, so it is CTC less those items.
Deduct your own PF contribution, professional tax, TDS and any other deductions such as insurance or NPS that your employer recovers.
There is no legal percentage. Employers commonly keep it around 40% to 50% of CTC. A higher basic raises PF, gratuity and the HRA exemption base, but also increases the pay that is fully taxable.
Under section 16 of the Income-tax Act, 2025: wages, any annuity or pension, gratuity, fees or commission, perquisites, profits in lieu of salary, advance salary and leave encashment, along with certain provident fund and pension scheme items.
Yes, ₹75,000 or the salary, whichever is less, under the new regime. In the old regime it is ₹50,000 (section 19(1), serial 2).
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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