How to Read Your Salary Breakup (Annexure)
Every line explained, and which ones you never actually see.
The components, and where each one goes
| Line | Reaches your bank monthly? | What it is |
|---|---|---|
| Basic salary | Yes | The base your PF, gratuity and HRA are all calculated from |
| House rent allowance | Yes | Cash, but partly tax-exempt in the old regime if you pay rent |
| Special / other allowance | Yes | The balancing figure, fully taxable, no strings |
| Employer PF | No | Set aside into your EPF corpus, part of CTC but not cash |
| Gratuity | No | Provisioned, payable only after five years of service |
| Variable / performance pay | Usually annual | Paid once a year if targets are met, not monthly |
The first three lines are your cash salary. Employer PF and gratuity are counted inside CTC to make the total look larger, but they never arrive as monthly pay: PF goes into your retirement corpus, and gratuity you only receive if you stay long enough. Variable pay is real, but it lands annually and only if you hit your targets, so it does not belong in a monthly budget.
Basic pay is the number that quietly drives everything
Basic is usually set at 40 to 50% of CTC, and almost every other figure keys off it. Your PF is 12% of basic, gratuity is 4.81% of basic, and your HRA exemption in the old regime is capped by basic. A low basic with a fat special allowance puts more cash in your hand each month but builds a smaller PF and gratuity. A high basic does the reverse. It is a genuine trade-off between cash now and forced saving, not a mistake to fix.
Turning the breakup into take-home
Add up the cash components to get your gross salary. Subtract the standard deduction and, in the old regime, your exemptions, to reach taxable income. Take off income tax and 4% cess, then your own PF contribution and state professional tax. What is left, divided by twelve, is your real monthly in-hand. It is always lower than the CTC divided by twelve, and the gap is the whole reason a breakup is worth reading.
Reading an actual offer letter right now? Paste it in and we'll pull out the numbers, flag clauses like these automatically, and show your real monthly in-hand.
Decode your offer letter →Frequently asked questions
- What is a good basic pay percentage?
- Around 40 to 50% of CTC is normal and balanced. Much below 40% means smaller PF and gratuity and a weaker HRA exemption; much above 50% boosts your retirals but trims your monthly cash. Neither is wrong, it just shifts the balance between saving and spendable pay.
- Why is the special allowance so large in my breakup?
- Special allowance is the balancing line: whatever is left of your gross salary after basic, HRA and other named components is put there. It is fully taxable with no exemptions, so a large special allowance simply means more of your pay is plain taxable cash.
- What is the difference between CTC and gross salary?
- Gross salary is your cash salary before deductions: basic plus HRA plus allowances. CTC is larger because it also includes employer PF, gratuity and other costs the company counts but you never receive as monthly pay. Gross is a subset of CTC.
Last reviewed August 2026.