Salary, offer letters and PF.
"Your CTC is ₹4.2 lakh" sounds great, until your first salary is ₹28,000, not ₹35,000. Today you'll learn to read an offer letter, understand your salary slip, PF and tax, and negotiate politely.
CTC vs in-hand salary
CTC (Cost to Company) is everything the company spends on you in a year. Your in-hand (take-home) salary is what actually reaches your bank account each month after deductions.
| Component | What it is |
|---|---|
| Basic salary | The core part, often 40–50% of CTC. Many other parts are calculated from it |
| HRA | House Rent Allowance: can reduce tax if you pay rent (old tax regime) |
| Special / other allowances | The rest of the fixed pay |
| Employer PF | Company's contribution to your Provident Fund: part of CTC, not paid monthly to you |
| Gratuity | A lump sum usually payable after 5 years of service, often shown in CTC |
| Variable / bonus | Depends on performance; not guaranteed |
| Insurance | Health insurance premium paid by the company |
Common monthly deductions
- Employee PF: usually 12% of basic salary goes to your EPF account (your savings, with interest).
- Professional tax: a small state tax; in Telangana it's up to ₹200 a month.
- Income tax (TDS): deducted if your annual income is above the tax limit.
An offer says CTC ₹4,20,000 including ₹21,600 employer PF and ₹30,000 performance bonus. What's the guaranteed fixed yearly pay before employee deductions?
4,20,000 − 21,600 (employer PF, goes to your PF account) − 30,000 (variable, not guaranteed) = 3,68,400. Then your own PF, professional tax and any income tax are deducted from that.
PF: your forced savings
Your EPF (Employees' Provident Fund) is a retirement savings account managed by EPFO. Both you and your employer contribute, and it earns interest. You get a UAN (Universal Account Number) that stays the same across jobs. Activate it on the EPFO member portal and check your passbook regularly to confirm the company is really depositing.
Income tax basics
India has two tax regimes (old and new). Under the new regime, which is now the default, people with income up to about ₹12 lakh a year often pay no income tax after rebates, under the rules announced in Budget 2025. Tax rules change every year, so check the official Income Tax Department website or ask a CA. You'll get Form 16 from your employer each year: keep it for filing your return.
What to check in an offer letter
- Job title, location, joining date, reporting manager.
- CTC breakup (ask for it if missing).
- Probation period and notice period.
- Working hours, leave policy, work-from-home rules.
- Any bond or service agreement (how long, what penalty). Read it carefully before signing.
- The company's official email domain (fake offers exist!).
Negotiating politely
For freshers there's often little room, but for experienced roles it's normal.
"Thank you for the offer, I'm excited about the role. Based on my skills in
Power BI and SQL and the market range for this role, I was hoping for around
₹4.8 lakh. Is there any flexibility?"Research the market rate first (Glassdoor, AmbitionBox, people in the field). Be polite, never threaten, and be ready to accept if they can't move.
Your friend's offer letter includes a 2-year bond with a ₹2 lakh penalty. What should they do?
Bonds vary and can carry real penalties. Understand them before you commit.
Your task (20 min)
Take any sample salary (for example CTC ₹3.6 lakh, basic 45%). Calculate: monthly gross, employee PF (12% of basic), professional tax ₹200, and approximate in-hand. Then activate your UAN on the EPFO member portal if you already have a job.
Lesson 13 complete!
You understand CTC vs in-hand, salary components, PF, gratuity, tax basics and what to check in an offer letter. Next: growing in your career.
Next: Growing in your career →