74%
Share of a typical 12 LPA headline that reaches your bank account as monthly salary
Studojo offer model, new tax regime, Bengaluru, 2026
44%
Share of a 2 lakh variable payout lost to tax when it pushes taxable income past the 12 lakh rebate line
Studojo calculation, new tax regime slabs and Section 87A rebate
50%
Minimum share of total pay that must count as wages (basic + DA) under the labour codes in force from 21 Nov 2025
Code on Wages, effective 21 November 2025
A 12 LPA offer sounds like 1 lakh a month. It is not. CTC is the total the company budgets for you in a year. That includes money you never see monthly: the employer's PF contribution, a gratuity provision you only receive after about five years, group insurance premiums, a variable bonus that depends on ratings, and often a one-time joining bonus that disappears in year two.
We modelled a typical 12 LPA fresher offer: 10.5 lakh fixed, 1 lakh variable, and a 50,000 joining bonus. Basic pay is set at half of fixed pay, as the new labour codes now require. PF is 12% of basic on both sides, there is no PF wage cap, and the employee is in Bengaluru under the new tax regime. The result is a monthly credit of about 73,900. That is 74% of the 1 lakh a month the headline implies.
The good news is that a 12 LPA package pays almost no income tax under the new regime. Taxable salary stays under the 12 lakh line where the Section 87A rebate brings tax to zero. The gap between headline and in-hand at this level is almost entirely deferred money and conditional money, not tax.
Key insight: About a quarter of a 12 LPA offer is money that is either saved on your behalf (PF, gratuity), conditional (variable), or one-time (joining bonus). Only the monthly credit is guaranteed cash.
Where a typical 12 LPA offer goes in year one (Studojo model)
Model assumptions: New tax regime with 75,000 standard deduction, 4% cess, professional tax of 200 a month, basic at 50% of fixed pay, PF uncapped at 12%, gratuity at 4.81% of basic. Your offer will differ. Use the method, not just the numbers.
Until late 2025 many Indian employers kept basic pay at 30% to 40% of CTC and paid the rest as allowances. A low basic meant low PF and gratuity contributions, so more of the CTC landed in the monthly salary. The four labour codes that came into force on 21 November 2025 changed that. Wages, meaning basic plus DA, must now be at least 50% of total pay.
A higher basic means a higher PF deduction from your salary and a higher employer PF charge inside the same CTC. Business Today's November 2025 salary calculator showed annual in-hand pay at a 15 lakh CTC falling from about 12.43 lakh to about 11.79 lakh under the new structure. Nobody's CTC went down. The share paid out monthly did.
Key insight: The money did not vanish. It moved into your PF account and a larger gratuity base. But if you compare offers by monthly cash, two identical CTCs can now differ by several thousand rupees a month.
Gratuity got bigger and closer. It is now calculated on the higher wage base, and the codes extend gratuity to fixed-term employees after one year instead of five. PF is real money, just locked. Employee and employer PF together are roughly a tenth of a typical CTC. It earns interest and can be withdrawn under specific conditions, but it will not pay your rent. What to ask: Whether PF is calculated on full basic or capped at the 15,000 statutory wage ceiling. A capped structure leaves you noticeably more cash each month, with a smaller retirement corpus.
Variable pay is the most misunderstood line in a fresher offer. It is usually tied to your rating and the company's results, it is often paid quarterly or annually rather than monthly, and many companies pay less than 100% in a weak year. Treat it as a possibility, not part of your salary.
There is also a tax trap. Under the new regime, taxable income up to 12 lakh carries effectively zero tax because of the Section 87A rebate. Above that line, the rebate disappears and slab tax applies to the whole income, with only narrow marginal relief just above the line. In our 20 LPA startup model, the fixed salary alone produces taxable income of about 12.07 lakh, and the tax on it is about 7,600 for the year. A 2 lakh variable payout pushes taxable income to about 14.07 lakh and the tax bill to about 94,700. The extra 87,000 of tax means 44% of that bonus goes to tax.
Key insight: Around the 12 lakh line, extra variable pay is taxed at a far higher effective rate than the slab table suggests. A larger fixed salary with a smaller variable is often worth more than the headline implies.
Ask for the payout history. What percentage of target variable did people at your level actually receive in the last two cycles? A recruiter who will not answer has answered. Check the payout schedule. Annual variable paid after the appraisal cycle means a fresher joining in July may not see any of it for over a year, or may receive a pro-rated amount. Check what triggers forfeiture. Many policies pay variable only to employees still on the rolls on the payout date. Leave a week early and the money stays with the company. Joining bonuses make the first-year number look bigger, but they are one-time. In our 12 LPA model, the 50,000 joining bonus means the year-two CTC is really 11.5 lakh before any hike. Most joining bonus clauses also include a clawback: leave within a set period, commonly 12 months, and you repay some or all of it.
ESOPs are the biggest gap between headline and cash. A startup that quotes 20 LPA including 4 lakh a year of ESOPs is usually quoting the value of options at the last funding round, vesting over four years with a one-year cliff. Nothing vests in your first year. When you exercise, the gap between fair market value and your exercise price is taxed as salary, even though you cannot sell the shares. Employees of eligible DPIIT-recognised startups can defer that tax, but they still owe it later.
Key insight: In our 20 LPA startup model, guaranteed monthly in-hand is about 99,000, which is 59% of the 1.67 lakh a month the headline implies. The ESOP slice may be worth a lot or nothing, and you will not know for years.
Read the ESOP grant letter, not the offer letter. You need the number of options, exercise price, vesting schedule, cliff, exercise window after leaving, and whether buybacks have ever happened. Short exercise windows are a hidden cost. If you must exercise within 90 days of leaving, you may need to pay the exercise price and the perquisite tax in cash for shares you cannot sell. Rule of thumb: Compare offers on guaranteed annual cash (monthly in-hand x 12), then treat variable, joining bonus and ESOPs as separate bets with their own odds.
We ran the same method across five offer types that freshers commonly see. A 3.6 LPA IT services entry offer with no variable pays about 25,500 a month, which is 85% of the headline monthly figure. A 7 LPA elite-track offer with 10% variable pays about 44,700, or 77%. The 12 LPA mid offer pays about 73,900, or 74%.
Above that, the share falls fast. An 18 LPA product company offer (15 lakh base, 10% bonus, 1.5 lakh sign-on) pays about 1,00,300 a month, or 67%, because base salary alone crosses the rebate line and slab tax starts. A 20 LPA startup offer that includes 4 lakh of ESOPs pays about 99,000, or 59%. On guaranteed monthly cash, the 18 LPA and 20 LPA offers are almost the same.
Key insight: A 2 lakh difference in headline CTC can be a near-zero difference in monthly cash. Always convert offers to monthly in-hand before comparing.
Monthly in-hand pay as a share of headline CTC divided by 12 (Studojo model)
Ask for the annexure that lists every component, not just the summary. Then work from the top down: monthly gross, minus your PF, minus professional tax, minus estimated monthly TDS. That figure is your salary. Everything else is a benefit, a saving or a bet.
Summary insight: The question is not how big the CTC is. It is how much arrives every month, how much is locked away for you, and how much depends on things outside your control.
Monthly gross and basic. Is basic at least 50% of pay, and is PF on full basic or capped? Variable. Target percentage, payout frequency, last two years' actual payout, and whether you must be employed on the payout date. Joining bonus. When is it paid, and what is the clawback period? ESOPs. Grant size, strike price, vesting, cliff, post-exit exercise window and buyback history. Insurance and gratuity. Are these counted inside CTC? Many offers include them, which inflates the headline without changing your pay. Compare offers on monthly in-hand, not CTC. Convert every offer to guaranteed monthly cash before you compare. Two offers 2 lakh apart on paper can pay the same each month. Discount variable pay and ESOPs. Treat them as bets with odds you should ask about. Payout history and vesting terms matter more than the headline value. Watch the 12 lakh tax line. Around 12 lakh of taxable income, extra variable pay can be taxed at over 40%. Fixed pay is usually worth more than an equal amount of variable. Remember the money that is still yours. PF and gratuity are not lost. They are deferred. Count them as savings, not salary. How much do you actually get in hand on a 12 LPA salary?
A typical 12 LPA fresher offer pays about 73,900 a month in hand, roughly 74% of the 1 lakh a month the headline implies. The model assumes 10.5 lakh fixed, 1 lakh variable and a 50,000 joining bonus, with the new tax regime and Bengaluru professional tax. Your own offer will differ, so use the method rather than just the numbers.
Why is my in-hand salary lower than CTC divided by 12?
CTC is the total the company budgets for you, not your monthly salary. It includes employer PF, a gratuity provision, insurance premiums, variable pay and often a one-time joining bonus. About a quarter of a 12 LPA offer is money that is saved for you, conditional or one-time, and only the monthly credit is guaranteed cash.
How did the new labour codes change take-home pay?
Under the labour codes in force from 21 November 2025, wages (basic plus DA) must be at least 50% of total pay. A higher basic means a higher PF deduction and a higher employer PF charge inside the same CTC. Business Today's calculator showed annual in-hand at a 15 lakh CTC falling from about 12.43 lakh to about 11.79 lakh, with the difference moving into PF and gratuity.
Is variable pay taxed heavily on a 20 LPA offer?
It can be. Under the new regime, taxable income up to 12 lakh gets effectively zero tax through the Section 87A rebate. In the report's 20 LPA startup model, a 2 lakh variable payout pushes taxable income to about 14.07 lakh and adds about 87,000 of tax, so 44% of that bonus goes to tax.
Do ESOPs and joining bonuses count as salary?
No. A joining bonus is one-time and often carries a clawback if you leave within about 12 months. ESOPs usually vest over four years with a one-year cliff, so nothing vests in your first year. In the 20 LPA startup model, guaranteed monthly in-hand is about 99,000, or 59% of the 1.67 lakh a month the headline implies.
How should I compare two job offers?
Convert each offer to guaranteed monthly in-hand pay before comparing. Ask for the annexure that lists every component, then work down from monthly gross, minus your PF, professional tax and estimated TDS. Treat variable pay, the joining bonus and ESOPs as separate bets, because two offers 2 lakh apart on paper can pay almost the same each month.
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