CTC to In-Hand Salary in India for FY 2026-27 Under the New Regime

The rule and its legal source

CTC is the total yearly cost the employer shows for you. It is not the money that reaches your bank account. Part of it goes into your provident fund, part may go into gratuity or insurance, and part may be variable pay that is paid only if targets are met. Your take-home pay is what remains after the employer's own costs are removed and after your own statutory deductions and income tax are taken out.

For FY 2026-27, the income tax side has a new legal base. The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961. For salary, the standard deduction now sits in Section 19 of the 2025 Act. Under the 1961 Act it was Section 16(ia). The amount is ₹75,000 under the new regime and ₹50,000 under the old regime, or the salary itself if that is lower. The deduction needs no bills or investment proofs.

The new regime is the default for salaried employees unless you opt for the old regime when you file or declare to your employer. The new-regime tax rules are now in Section 202 of the 2025 Act, which replaced Section 115BAC of the 1961 Act. The slabs themselves did not change for FY 2026-27. Budget 2026 left the new-regime slabs, the ₹12 lakh rebate ceiling and the ₹75,000 standard deduction as they were.

The FY 2026-27 new regime slabs

Under the new regime, taxable income is charged at these rates. Each band applies only to the part of income that falls inside it.

A 4% Health and Education Cess is added on top of the tax computed. The slab figures above come from the rate tables that several 2026 tax guides reproduce for FY 2026-27. Check them against the Income-tax Act, 2025 text and the income tax department's website before you finalise a payroll set-up.

How the in-hand figure is worked out, step by step

1. Take the annual CTC and remove the employer's own PF contribution and any other amount the employer pays in your name but you never receive, such as gratuity provision or group insurance premium. What remains is your gross salary.
2. Divide the gross salary by twelve to get the monthly gross.
3. Work out your employee PF. It is 12% of basic pay plus dearness allowance, but only up to the wage ceiling. From 17 September 2026 that ceiling is ₹25,000 a month, so the most you contribute is ₹3,000 a month, unless your employer's rules or your voluntary choice set a different base.
4. Deduct professional tax for your state. It is levied by the state, capped at ₹2,500 a year under Article 276 of the Constitution, and usually deducted monthly by the employer.
5. Subtract the standard deduction of ₹75,000 from the annual gross salary to get the taxable salary.
6. Apply the slabs above to the taxable income, add 4% cess, and check the Section 156 rebate. The rebate applies only if total taxable income is up to ₹12 lakh.
7. Divide the annual tax by twelve. That is the monthly TDS your employer deducts, based on the tax it projects for the whole year.
8. Subtract employee PF, professional tax and monthly TDS from the monthly gross. The result is your in-hand salary.

Worked example: CTC of ₹18,00,000 in Maharashtra

Take an employee with an annual CTC of ₹18,00,000, or ₹1,50,000 a month, who works in Maharashtra. For this example we assume the CTC contains only gross pay and the employer's PF. Basic pay is ₹25,000 a month, which is at the new ₹25,000 wage ceiling. The employer's PF is ₹3,000 a month, which the employer splits roughly into ₹2,083 for the Employees' Pension Scheme and ₹917 for the EPF account, using the 8.33% and 3.67% split that applies to the employer's 12%.

In this example the employee takes home about ₹1,31,857 a month, which is roughly 73% of the CTC. The gap is made up of employer PF, the employee's PF, professional tax and income tax. Maharashtra charges ₹300 in February, so the annual professional tax there is ₹2,500 in total. The monthly TDS figure is only an estimate that rests on the salary, the regime and the deductions your employer knows about.

Cases that change the answer

The standard deduction is an annual figure. If you join or leave in the middle of the year, your employer should prorate your salary for the months you worked, and the deduction is applied to the salary actually paid in that tax year. Mid-year exits also change the monthly TDS, because the employer recalculates the year's tax on the salary you did earn.

The contract type matters. Employees on a regular employment contract get the standard deduction. A freelancer or a consultant paid on invoices does not get salary treatment at all, so there is no standard deduction and no employer PF. Fixed-term employees are usually treated like permanent staff for PF and professional tax. Check the contract wording and the state rules for each case.

Minimum service rules affect the components of CTC, not the monthly pay itself. Gratuity under the Payment of Gratuity Act, 1972 generally requires continuous service of five years before it becomes payable, and the amount that is exempt from tax depends on the rules in the Income-tax Act, 2025. So gratuity shown in CTC should not be counted as monthly take-home pay.

Several caps decide how big the figures can get. The PF wage ceiling of ₹25,000 limits the mandatory contribution. The ₹2,500 annual cap on professional tax applies in every state. The employer's NPS contribution is deductible in the new regime up to 14% of basic pay plus dearness allowance. An employee's own NPS contribution is not deductible in the new regime. Voluntary PF above 12% is not matched by the employer and is taken from your pay.

Exclusions also matter. The ₹12 lakh rebate does not apply to income taxed at special rates, such as certain capital gains, and it is not available to non-residents. Income from other sources, such as interest or rent, can push your total taxable income above ₹12 lakh even when your salary alone is below it.

Professional tax is a point where sources differ. Several 2026 guides state that professional tax is not deductible under the new regime, referring to Section 202(2) of the Income-tax Act, 2025. Another guide says it is deductible under both regimes. Until you have confirmed the position with a tax adviser or your employer's payroll team, do not count on any tax relief for professional tax when you estimate the TDS.

Common mistakes

The most common error is treating CTC as gross pay. The employer's PF is inside the CTC, and so are any gratuity provision and insurance premium. Start from the CTC break-up sheet, not from the headline number.

The second mistake is using the old ₹15,000 wage ceiling. Many articles and payroll templates still show ₹15,000 and ₹1,800 employee PF. For contributions from 17 September 2026 onwards, the ceiling is ₹25,000. Contributions for months before that date follow the ceiling then in force.

The third mistake is assuming that a salary of ₹12.75 lakh means zero tax and zero TDS. The ₹12.75 lakh figure works because the standard deduction takes gross salary down to ₹12 lakh of taxable income, and the rebate then removes the tax. Once the taxable income is over ₹12 lakh, the rebate is lost and marginal relief applies only in a narrow band just above the limit. Other income can also push you over.

The fourth mistake is quoting the old section numbers in FY 2026-27 paperwork. For income earned from 1 April 2026, the salary deduction is Section 19 and the rebate is Section 156 of the Income-tax Act, 2025. For income earned up to 31 March 2026, the 1961 Act's Section 16(ia) and Section 87A still apply.

The fifth mistake is treating the monthly TDS as the final tax. TDS is a projection. If your bonus, other income, or declared deductions change, the year-end tax can be different, and you may have a refund or a balance to pay when you file.

What to check with HR or a lawyer

Ask HR for the CTC break-up sheet and confirm which items are part of the gross pay and which are employer costs. Ask whether PF is calculated on the ₹25,000 ceiling or on full basic pay, because that changes take-home pay by several thousand rupees a year. Ask which state's professional tax table the employer uses, based on the state where you work, not where the company is registered.

Confirm the regime your employer has recorded for you, and whether the TDS projection assumes the new regime. Check how the employer treats professional tax under the new regime, given the conflicting guidance. Ask for the Section 19 and Section 156 references to be used on your declarations and Form 130 or Form 138 style records, if your employer has moved to the new forms from 1 April 2026.

Ask a qualified tax adviser or a labour lawyer to confirm three things: the gratuity and leave encashment treatment in your offer, the handling of notice-period and full-and-final settlement pay, and any special clause on voluntary PF or variable pay. The calculator on this page gives an estimate. It does not replace the employer's payroll records or professional advice.

How employers take the routine work out of payroll

For an HR or payroll team, the same steps repeat every month for every employee: recalculating PF against the wage ceiling, choosing the right state professional tax slab, projecting annual tax, and checking the payslip against the CTC sheet. AI workers can take over the repetitive part of that work by reading the salary structure, applying the current rules, preparing the draft payslip and flagging the exceptions for a person to review.