CTC vs gross salary Tax Year 2026–27
Gross salary is what your offer letter’s salary table adds up to. CTC is that plus everything your employer spends on you outside it.
This is the first of the two subtractions between your offer letter and your bank account, and the one people miss most often. The second, gross to net, at least shows up on a payslip. This one happens before the payslip exists.
What comes out of CTC to get to gross
- The employer's PF contribution. 12% of the PF wage. Capped at the ₹15,000 statutory wage, that is ₹21,600 a year; charged on a full ₹60,000 Basic it is ₹86,400.
- The gratuity provision. Commonly 4.81% of Basic + DA, an accounting entry against a payment you get only after five years.
- Group insurance. Health, life and accident cover the employer buys for you.
- Employer NPS, where offered. Up to 14% of Basic + DA, deductible under section 80CCD(2).
- Anything else they can attribute to you. Meal cards, equipment allowances, training budgets. Practice varies widely.
How large is the gap?
On a standard structure with PF at the statutory ceiling and a gratuity provision inside CTC, employer-side costs run about 4% of the package. If your employer charges PF on your full Basic instead, it can reach 8–9%.
Which means the same ₹20 lakh CTC can produce a gross salary anywhere from roughly ₹18.2 lakh to ₹19.2 lakh depending on the structure alone.
Where this matters
Comparing offers. An employer who keeps their PF contribution outside CTC is genuinely paying more than one who counts it in, at the same headline number.
Reading a payslip. Your payslip starts at gross, not CTC. If you are trying to reconcile your offer letter against your first payslip and the numbers do not match, this is usually why.
Loan applications. Lenders work from payslips, so gross and net are the numbers that count.
Common questions
Is gross salary the same as Basic salary?
No. Basic is one component of gross salary, usually 40–50% of it. Gross is Basic plus DA, HRA, special allowance and every other cash component added together.
Should the employer’s PF be inside my CTC?
There is no rule either way, and both practices are common. Counting it in makes the headline larger without paying you more. It is a fair question to ask a recruiter, and the answer is worth a percent or two of the package.
Does gross salary include variable pay?
Usually yes on an annual basis, but it is not part of your monthly gross. If ₹3 lakh of a ₹20 lakh CTC is variable, your monthly payslip is built on the remaining ₹17 lakh.
Related
Written by Divya Akash Dutta. Published 18 August 2026. Last reviewed 18 August 2026 for Tax Year 2026–27.