Salary glossary
Every term on an Indian offer letter or payslip, answered in the first sentence with FY 2026-27 figures, and linked to the tool that computes it for your salary.
LPA
LPA stands for lakhs per annum: ₹1 lakh is ₹1,00,000, so a 12 LPA package is ₹12,00,000 of CTC a year.
CTC
CTC stands for cost to company: the total amount an employer spends on you in a year, including your gross salary, the employer share of provident fund, any gratuity provision, insurance premiums and sometimes the value of perks.
CTC vs gross vs in hand
CTC is what the company spends, gross is CTC minus the employer's PF and gratuity contributions, and in hand is gross minus income tax, your own EPF and professional tax.
In hand salary
In hand salary, also called take home or net salary, is the amount credited to your bank account each month after income tax, employee provident fund and professional tax are deducted from gross salary.
Basic salary
Basic salary is the fixed core of your pay on which provident fund, gratuity and HRA exemption are calculated, typically 40% to 50% of CTC in India.
HRA
HRA stands for house rent allowance, a salary component paid toward rent.
Standard deduction
The standard deduction is a flat amount removed from salary income before tax, with no proof required: ₹75,000 under the new regime and ₹50,000 under the old regime in FY 2026-27.
Section 87A rebate
The section 87A rebate cancels income tax of up to ₹60,000 for anyone whose taxable income is ₹12,00,000 or less under the new regime in FY 2026-27.
Marginal relief
Marginal relief limits the extra tax to the extra income when taxable income crosses a threshold, so earning ₹10,000 above the ₹12 lakh rebate cap costs at most ₹10,000 of tax instead of the full slab tax of about ₹61,500.
Professional tax
Professional tax is a small state levy on salaried income, capped at ₹2,500 a year by Article 276 of the Constitution and deducted by your employer each month.
EPF
EPF stands for Employees Provident Fund, a retirement account under the EPF Act 1952 into which you contribute 12% of basic and your employer another 12%, of which 8.33% of basic capped at ₹1,250 a month goes to the Employees Pension Scheme.
Gratuity
Gratuity is a lump sum an employer pays when you leave after at least five years of continuous service, calculated as 15 days of your last basic for every completed year: last monthly basic multiplied by 15/26 multiplied by years of service.
TDS on salary
TDS on salary is the income tax your employer deducts under section 192 each month, computed by estimating your tax for the whole year and spreading it across the remaining months.
Form 16
Form 16 is the certificate your employer issues by 15 June each year showing the salary paid and the TDS deducted for the previous financial year.
Variable pay
Variable pay is the performance-linked part of CTC, usually 5% to 20% of the package, paid quarterly or annually rather than monthly and often at less than 100% of target.
Surcharge and cess
Health and education cess is 4% of income tax, charged on every taxpayer, which turns the 30% top slab into an effective 31.2%.