Money, once

CTC is what you cost your employer, not what you are paid. Between the two sit lines you never receive monthly (employer PF, the gratuity provision), lines paid only if conditions hold (variable pay, stock, a joining bonus) and income tax at your top rate on every extra rupee. This lesson holds every money rule the guide uses, once, with its source and the date it was checked. Other lessons point here. Each rule is a row in a table; Asha, the invented engineer from lesson 0, is the one worked example throughout.

The payslip and the CTC bundle

A CTC figure bundles up to ten kinds of line. Read each against this table before you compare two numbers:

Asha's offer letter and payslip, both invented, show how the lines fall. She works in Bengaluru with PF on her full basic and no variable pay.

  Line                          a year      a month
  Basic                      11,20,000       93,333
  HRA                         5,60,000       46,667
  Special allowance           9,31,754       77,646
  Gross pay                  26,11,754     2,17,646
  Employer PF (12% of basic)  1,34,400       11,200
  Gratuity provision            53,846        4,487
  CTC                        28,00,000
  Deductions from gross: her PF 11,200, professional
  tax (state levy, invented here) 2,500 a year, TDS.

Figure 2.1 draws that fall from CTC to in hand.

How to check yours. Lay three documents side by side: the offer or increment letter that set your CTC, your last three payslips, and last year's Form 16. Write the ten lines above for yourself, in rupees, and mark which reach your bank.

Next stop: Provident fund, 1 min

Provident fund

PF is 12 per cent of your EPF wages from each side, but only up to a wage ceiling unless you and your employer chose more.

Two engineers on the same CTC can take home different amounts. If Asha's PF were at the ceiling instead of on her full basic, her gross would rise to ₹27,10,154 and her in hand to ₹22,86,286 a year: ₹13,842 a month more, and ₹1,96,800 a year less saved in PF. Neither is wrong. When you compare offers, compare the PF basis too.

Next stop: Gratuity, 1 min

Gratuity

Gratuity is a lump sum paid when you leave after five years. The five-year line is the one most often crossed by accident, by a few weeks.

Asha joined on 3 January 2022 on a basic of ₹93,333 a month. Five completed years on 3 January 2027 give 93,333 × 15 ÷ 26 × 5 = ₹2,69,231, tax-free. Leave a day early and she receives nothing. After early July 2027 the formula counts six years: ₹3,23,077.

Next stop: Income tax on salary, 3 min

Income tax on salary

Two regimes; the new one is the default. Slabs and rates, tax year 2026-27:

Source: the Income Tax Department's e-filing portal, "Salaried individuals", read 4 Nov 2026, and the 2025 Act, s.202, read 31 Oct 2026. The rules around the slabs:

Asha, new regime: taxable income is 26,11,754 − 75,000 = ₹25,36,754. Slab tax is ₹3,00,000 on the first ₹24 lakh plus 30% of ₹1,36,754, so ₹3,41,026; no rebate, no surcharge; cess ₹13,641; tax ₹3,54,667, about ₹29,556 a month of TDS. Under the old regime, with HRA of ₹4,88,000 exempt against ₹6 lakh of rent and her PF and ₹25,000 of insurance deducted, her tax would be ₹4,01,498. The new regime leaves her ₹46,831 a year better off. Run both for yourself every April; rent is what swings it.

The number every other lesson needs is how much of one extra rupee of salary you keep. It falls with each band, as Figure 2.2 shows:

In two narrow zones tax takes about the whole extra rupee: from ₹12 lakh to about ₹12.7 lakh (the rebate's marginal relief) and from ₹50 lakh to about ₹51.6 lakh (the surcharge's). Computed from the rates above; no estimate.

So a ₹1 lakh raise at Asha's band is worth about ₹68,800 in hand, and at an ₹80 lakh taxable income about ₹65,700.

Next stop: Stock: grant, cliff, schedule, vest, 3 min

Stock: grant, cliff, schedule, vest

Stock is the line that most often makes a CTC look larger than the pay. Learn the words first:

The schedule decides how much of a grant counts in this guide's Rs 1 Cr, which takes only the first twelve months. Figure 2.3 draws the same grant on two schedules.

How stock is taxed, rule by rule:

Next stop: Joining bonus and clawbacks, 1 min

Joining bonus and clawbacks

A joining bonus is salary, taxed in the month paid, and almost always comes with a clawback. Read the clause for each row:

On ₹3,00,000 at 31.2 per cent, ₹93,600 goes in tax and ₹2,06,400 reaches you. Leave after 8 of 12 months on a pro-rata gross clause and you repay ₹1,00,000. On a net clause it would be ₹68,800, so the word "gross" costs ₹31,200. Whether tax already paid comes back when you repay: check the current rule, and ask payroll whether a same-year repayment can be netted.

Next stop: Notice, buyout, early release and bonds, 3 min

Notice, buyout, early release and bonds

Your notice period is the date most likely to decide your start, so read it before any recruiter asks.

Asha's letter says 90 calendar days. Buying out 60 unserved days costs ₹1,86,667 if computed on two months of basic, or ₹4,35,292 on two months of gross. Ask which before anything else. If a new employer reimburses ₹1,86,667 and it is taxed as salary at her 31.2 per cent, she keeps ₹1,28,427; a reimbursement grossed up to ₹2,71,318 covers it fully.

Before you ask HR anything, read the whole appointment letter and the policies it names. Write down:

Then decide whether to resign before you hold an offer. The routes, in the author's judgement (untested):

Do not resign to prepare: it trades every dated item for a deadline with no income.

Next stop: What to say about pay and notice, 1 min

What to say about pay and notice

Recruiters (lesson 4) and hiring managers (lesson 11) ask the same four things. Answer from your documents; the wordings are the author's, untested.

Next stop: Switch or stay: the arithmetic, 2 min

Switch or stay: the arithmetic

A CTC hike does not give the same rise in hand, because each extra rupee is taxed at your top rate. On Asha's structure, with every line (basic, PF, allowance) scaled by the hike:

Her floor, 25 per cent more in hand, is ₹2,20,853 a month: a CTC of about ₹36.9 lakh, a 32 per cent "hike". The gap from today, ₹44,171 a month, is also what each month of delay costs once she holds such an offer.

Next, every dated item the coming year pays her for staying, tested against her last working day (90 days after she resigns): gratuity at five years on 3 January 2027 (₹2,69,231), the RSU vest on 15 February 2027 (₹2,92,400 after tax, and her plan vests during notice), and a ₹1,50,000 bonus on 30 June 2027 paid only to staff not serving notice (₹1,03,200 after tax).

Price each wait at ₹44,171 a month:

• November or December? One month costs ₹44,171 and keeps the ₹2,92,400 vest. Wait.
• December or July? Seven months cost ₹3,09,197 to gain ₹1,57,046 (the bonus and a sixth year of gratuity). Do not wait.
• Early release in November? It gains about ₹68,000 of new pay and loses ₹2,69,231 of gratuity: the worst row.
• Ask the new employer to cover the vest? To replace ₹2,92,400 after tax, a joining bonus taxed at 31.2 per cent must be ₹4,25,000.

Her rule: "Not before 1 December 2026: the February vest."

Next stop: The cash part of Rs 1 Cr, 1 min

The cash part of Rs 1 Cr

Lesson 0 defines Rs 1 Cr as fixed pay plus target variable plus first-year vested stock at grant price, and prints an invented Senior offer: ₹60 lakh fixed, ₹9 lakh variable, ₹31 lakh of first-year stock. Here is what it pays in year one, new regime, if the share price stays at the grant price:

So this Rs 1 Cr offer has a cash part of ₹69 lakh before tax, about ₹45 lakh in hand, and about ₹20 lakh of shares whose value moves with the price. The pay figures are the author's estimate (not measured) of a Senior offer at a large employer; the tax is computed.

Practice with an AI: the prompt kit in the appendix has 1 card for this lesson.

Sources