Rohit joined a ₹10.5 lakh role as a software engineer in Bengaluru and had to pick a tax regime on the joining form. New regime: ₹74,696 a month, zero income tax. Old regime with no real deductions: ₹66,475 a month, because ₹10.5 lakh gets taxed ₹98,643 there. Same CTC, ₹8,220 a month difference, decided by one checkbox.
What ₹10.5 lakh CTC actually contains
Standard 50% basic structure at ₹10.5L:
| Component | Annual | Monthly |
|---|---|---|
| Basic salary | ₹5,25,000 | ₹43,750 |
| HRA (50% of basic) | ₹2,62,500 | ₹21,875 |
| Special allowance | ₹1,74,248 | ₹14,521 |
| Employer PF (12% of basic) | ₹63,000 | ₹5,250 |
| Gratuity provision (4.81%) | ₹25,253 | ₹2,104 |
| Total CTC | ₹10,50,000 | ₹87,500 |
Employer PF plus gratuity comes to ₹88,253. That money sits inside the ₹10.5 lakh CTC and never lands in your salary account. Your gross salary, the part payroll actually pays, is ₹9,61,748 a year.
Take-home calculation (new regime)
| Item | Annual | Monthly |
|---|---|---|
| Gross salary (excl. employer PF + gratuity) | ₹9,61,748 | ₹80,146 |
| Less: Employee PF | ₹63,000 | ₹5,250 |
| Less: Professional tax (Karnataka) | ₹2,400 | ₹200 |
| Less: Income tax | ₹0 | ₹0 |
| In-hand | ₹8,96,348 | ₹74,696 |
Tax working: gross ₹9,61,748 minus the ₹75,000 standard deduction leaves taxable income of ₹8,86,748. Taxable income stays under the ₹12 lakh line, so the section 87A rebate of up to ₹60,000 wipes the slab tax out entirely. Tax payable: zero.
New regime vs old regime at this salary
Under the new regime, taxable income of ₹8,86,748 sits under the ₹12 lakh line, so the section 87A rebate still reaches it and income tax is zero. Switch to the old regime with no major deductions and the same ₹10.5 lakh is taxed ₹98,643 a year, pulling monthly in-hand down to ₹66,475. That’s a gap of ₹98,643 a year, gone for ticking the wrong box.
The old regime only catches up if you genuinely stack deductions: the full ₹1.5 lakh under 80C, ₹25,000 of 80D health cover, ₹50,000 of NPS under 80CCD(1B), and real HRA exemption from rent paid. Without most of that, stay on the new regime. Run your actual numbers both ways in the take-home calculator before you commit on the joining form.
How take-home moves across the salary ladder
| CTC | Monthly take-home | Income tax / year |
|---|---|---|
| ₹9L | ₹63,996 | Zero |
| ₹10L | ₹71,129 | Zero |
| ₹11L | ₹78,262 | Zero |
| ₹12L | ₹85,395 | Zero |
| ₹10.5L | ₹74,696 | Zero |
All figures: new regime, Karnataka professional tax, 50% basic structure, FY 2025-26. Plug your own CTC and city into the take-home salary calculator for an exact number.
Sources
- Income Tax Act 1961: Section 115BAC new regime slabs, ₹75,000 standard deduction, Section 87A rebate (FY 2025-26)
- EPFO: 12% employee plus 12% employer PF contribution on basic salary
- Payment of Gratuity Act 1972: 4.81% gratuity provision formula
- State Professional Tax Acts (Karnataka rate used as the representative figure)