The Salaried Employee's Tax Guide

CTC (cost to company) is the total your employer spends on you. It is not your take-home pay. Employer PF and gratuity are part of that cost. They are not cash you can spend this month. Income tax, your own PF, and professional tax are then cut from the salary that is left. The same package can be taxed differently depending on how it is split. The old regime still exempts some allowances. The new regime taxes most of them.

Here are 30 parts a CTC can include, and how each one is treated:

These five change either your tax or the cash you actually receive. They are easy to miss if you only look at the CTC number on the offer letter.

The new regime is the default under Section 115BAC. You stay in it unless you opt out in the income-tax return. Use the table as a starting point, then check your own salary in the calculator.

HRA is exempt only in the old regime. Under Section 10(13A) and Rule 2A, the exempt amount is the lowest of these three:

Rule 2A treats only four cities as metros for the 50% test: Mumbai, Kolkata, Delhi, and Chennai. Bengaluru, Hyderabad, Pune, and every other city use 40% of basic pay.

Per CBDT employees benefits table (s.16(ia), AY 2026-27):

Only the old regime. Section 80C, together with 80CCC and 80CCD(1), stops at ₹1,50,000 on the CBDT threshold table. These payments can sit inside that cap:

Your own family and your parents have separate limits. A preventive check-up of up to ₹5,000 sits inside those limits. It is not an extra amount on top.

You cannot pay the insurance premium in cash and still claim it. A preventive health check-up can be paid in cash, up to the ₹5,000 sub-limit.

NPS is not EPF. Your own NPS payment, an extra ₹50,000, and your employer's NPS payment are three different sections.

ESTIMATE Most write-ups still put private-sector employer NPS at 10% of salary in the old regime. Some say Budget 2024 made 14% apply to everyone. This page uses 10% for old-regime private employees until the CBDT table says otherwise.

Employer NPS under Section 80CCD(2)

On a joint loan, each person can claim up to ₹2 lakh of interest, plus principal under Section 80C, only if that person is both an owner and a borrower and the EMI leaves their own bank account.

Professional tax is a state charge, deducted from salary. The income-tax deduction under Section 16(iii) is old regime only, and the legal cap is ₹2,500 a year. Your salary slip is the number that counts. The table is the usual salaried slab.

Odisha abolished professional tax with effect from 1 April 2026 (Odisha Repeal Ordinance, 2026). No PT is deducted in Odisha from FY 2026-27.

Section 87A can wipe out the tax if taxable income is low enough. Figures below are from the CBDT resident benefits table (Section 87A, labelled AY 2026-27).

In the new regime, if taxable income is between ₹12 lakh and about ₹12.70 lakh, marginal relief limits the tax to the income above ₹12 lakh. The estimate used here for the top of that band, before cess, is about ₹12,70,588.

Section 192 is how salary tax is collected. Your employer estimates the year's tax and cuts a share every month.

If PAN is inoperative, Section 206AA withholds at the highest of the prescribed rate, the rate in force, or 20%. That extra rate applies only where the normal rate is below 20%. See PAN-Aadhaar consequences.

HRA exemption. Bengaluru is not a Rule 2A metro, so the third test is 40% of basic pay.