Two offers land in the same week. One says ₹14,00,000. The other says ₹12,00,000. The first looks 17% better and most people stop reading there.
Run both through a salary calculator and the second one pays ₹6,510 more every month. Nothing was hidden and nobody lied — the difference is entirely in how the two packages are built. This guide covers what to check in the annexure before you sign, which clauses cost you later, what to ask HR, and how to compare two offers so the bigger number stops deciding it for you.
The Two-Offer Problem
Here are those offers in full. Offer A carries a 20% variable component — ₹2,80,000 of its ₹14,00,000 is performance pay, settled annually and only if targets are met. Offer B is entirely fixed.
| Offer A | Offer B | |
|---|---|---|
| Headline CTC | ₹14,00,000 | ₹12,00,000 |
| Variable component | ₹2,80,000 (20%) | Nil |
| Fixed CTC | ₹11,20,000 | ₹12,00,000 |
| Gross salary (monthly) | ₹88,141 | ₹94,651 |
| In-hand (monthly) | ₹84,941 | ₹91,451 |
Offer B pays ₹6,510 a month more — ₹78,120 a year — on a CTC that is ₹2,00,000 lower.
Offer A's variable pay may eventually arrive and close some of that gap. It may also arrive at 70% of target, or in a year when the company misses its numbers, or after you have left. Meanwhile the EMI, the rent and the SIP all come out of the monthly figure.
Figures are from the in-hand salary calculator — new regime, Basic at 50%, metro city, Karnataka Professional Tax, PF on the statutory ceiling. Enter your own numbers and you will see the same arithmetic.
What the CTC Number Is Actually Made Of
CTC is not your salary. It is what you cost your employer, and it contains three things that behave completely differently.
| Part of CTC | Reaches you | When |
|---|---|---|
| Fixed cash — Basic, HRA, allowances | Yes | Every month, after deductions |
| Variable pay, bonus, incentives | Conditionally | Annually or quarterly, if targets are met |
| Employer PF, gratuity, insurance premiums | Not as cash | PF on withdrawal; gratuity after five years |
The monthly credit you will actually live on comes from the first row only, less your own PF, Professional Tax and TDS. Between CTC and that figure the gap is typically 10% to 20% before variable pay is considered, and much larger once it is.
So the first calculation on any offer is not "what is the CTC" but "what is the fixed CTC" — the headline minus everything conditional. That number, not the headline, is what your monthly pay is built from.
Fixed vs Variable — The Line That Decides Most Offers
A variable component is not a problem in itself. Not knowing its size is.
As a rough guide: 10% variable is normal in most roles; 15–20% is common in sales and senior positions; above 25% you are being paid partly in a promise. None of those is wrong, but each one means something different for the money arriving each month.
Four questions settle it, and all four deserve answers in writing:
- What is the payout history? Ask what percentage of target was actually paid in the last two years, company-wide. A team that has paid 60% twice running is telling you what your variable is really worth.
- Is it individual or company performance? If the whole pool depends on company results, your own performance may not protect it.
- When is it paid, and must you be employed on that date? Most schemes require you to be on the rolls on the payout date. Resign in March and a year's variable can disappear.
- Is any part of it guaranteed in year one? Many employers will guarantee the first year's variable to close a candidate. It is one of the easiest things to ask for and one of the most valuable.
The PF Line Almost Nobody Reads
Two offers at exactly the same CTC can pay differently because of one policy choice: whether Provident Fund is applied to the statutory wage ceiling of ₹25,000 or to your actual Basic.
At a ₹14,00,000 CTC, identical in every other respect:
| PF applied to | Employer PF (₹/mo) | Your PF (₹/mo) | In-hand (₹/mo) |
|---|---|---|---|
| Statutory ceiling of ₹25,000 | 3,000 | 3,000 | ₹1,02,863 |
| Actual Basic | 6,836 | 6,836 | ₹99,180 |
₹3,683 a month — ₹44,196 a year — on the same CTC.
Neither option is better in the abstract. PF on actual Basic puts substantially more into your retirement corpus, tax-free and earning interest; PF on the ceiling puts more in your pocket now. What matters is that you know which one you are being offered, because two offers quoting the same CTC are not the same offer if they differ here.
The ceiling itself changed recently — from ₹15,000 to ₹25,000 on 17 September 2026 under notification S.O. 5109(E) — so older offer letters and templates may still reflect the old figure. See the PF / EPF calculator for what each option accumulates over time.
Ten Things to Check in the Annexure
If the offer does not come with a component-wise annexure, ask for one before you respond. An offer that quotes only a CTC is not a complete offer.
- Fixed CTC versus total CTC. Subtract every conditional component. What remains is what your monthly pay is built on.
- Basic as a percentage. Around 50% of total remuneration is both compliant and optimal. A much higher Basic raises your PF and gratuity but lowers monthly cash.
- Which PF mode applies. Ceiling or actual Basic — worth thousands a month, as above.
- Whether gratuity is inside CTC. Commonly it is, at 4.81% of Basic. You receive it only on separation after five years — one year on a fixed-term contract.
- Employer NPS. Deductible under Section 80CCD(2) in both tax regimes, which makes it one of the few components that still helps under the new regime.
- Insurance premiums counted as CTC. Medical and life cover shown as your cost. Real benefits, but not money.
- Reimbursements versus allowances. A reimbursement needs bills and is paid against them. An allowance is paid regardless. They are not interchangeable.
- Joining bonus, and its clawback. Almost always repayable if you leave within a stated period — often on the gross amount, after you paid tax on it.
- Retention bonus timing. A bonus at month 18 is not part of your first year, whatever the annexure implies.
- Your state. Professional Tax differs by state, and a relocation changes your HRA percentage — 50% of Basic in eight cities, 40% everywhere else.
Clauses That Cost You Later
The salary annexure is the part everyone reads. These sit elsewhere in the letter and are where the expensive surprises live.
Notice period. Ninety days is common in India and it is the clause most likely to cost you a future opportunity. Check whether it can be bought out, at what rate, and whether the employer is obliged to accept a buyout or merely permitted to.
Joining bonus clawback. Usually repayable in full if you leave within twelve or eighteen months, and usually calculated on the gross figure — so you repay money you never received, having already paid tax on it.
Training bonds. Still common in some sectors. Check the amount, the lock-in and whether it is enforceable as written, because many are drafted more aggressively than they could be enforced.
Probation terms. Sometimes a lower salary, a shorter notice period in the employer's favour, or benefits that only begin on confirmation.
Variable pay eligibility on exit. The requirement to be employed on the payout date, which quietly converts your variable into a retention device.
What to Ask HR Before You Sign
These are normal questions. A good employer answers them without friction, and how they respond tells you something either way.
- Can I have the component-wise annexure, monthly and annual?
- What is the fixed CTC, excluding variable and one-time components?
- Is PF applied to actual Basic or to the ₹25,000 ceiling?
- What percentage of target variable was actually paid out in the last two years?
- Is the first year's variable guaranteed?
- Is gratuity included within the CTC shown?
- What is the notice period, and is a buyout permitted?
- What are the clawback terms on the joining bonus, and is it calculated on gross or net?
- Does the salary change on confirmation of probation?
- Which components are reimbursements requiring bills?
Ask them in one email rather than piecemeal. A single well-organised list reads as diligence; five separate messages read as anxiety.
How to Compare Two Offers Properly
Four steps, in this order. Most people do only the first and wonder later why the bigger offer felt smaller.
- Strip out everything conditional. Variable pay, joining bonus, retention bonus, stock. Compare the fixed CTC of each.
- Convert each fixed CTC to monthly in-hand with the same assumptions — same state, same regime, same PF mode. This is where most gaps appear.
- Add back the conditional components at a realistic rate, not at 100%. If a scheme has paid 70% of target for two years, value it at 70%.
- Price the clauses. A 90-day notice period against 30 is a real cost. A clawback is a real liability. They belong in the comparison even though no annexure assigns them a number.
Work steps 1 and 2 with the in-hand salary calculator. If you want to see how the components fit together, or to check whether a proposed structure is sensible, the salary breakup calculator shows the full structure and lets you change it.
Frequently Asked Questions
Can an offer with a higher CTC pay less every month?
Yes, and it is common. A ₹14,00,000 offer with 20% variable pay has a fixed CTC of ₹11,20,000 and pays about ₹84,941 a month, while a ₹12,00,000 all-fixed offer pays about ₹91,451 — ₹6,510 a month more on a CTC that is ₹2,00,000 lower. Compare fixed CTC, never the headline.
What is a reasonable variable pay percentage in an offer?
Around 10% is normal in most roles, 15–20% in sales and senior positions. Above 25% a meaningful part of your pay depends on outcomes you may not control. None of these is automatically bad, but the higher the percentage, the more the payout history matters — ask what percentage of target was actually paid in the last two years.
Should I ask for the salary annexure before accepting?
Yes, always. An offer quoting only a CTC is incomplete. The annexure should show each component monthly and annually, separating cash earnings, employer contributions and deductions. Reputable employers provide it without hesitation, and reluctance to share it is itself informative.
Does the PF option in an offer really change my take-home?
Substantially. At a ₹14,00,000 CTC, PF on the ₹25,000 statutory ceiling gives about ₹1,02,863 a month; PF on actual Basic gives about ₹99,180 — a difference of ₹3,683 a month, or ₹44,196 a year, on an identical CTC. The second option puts more into your retirement corpus instead, so neither is simply better.
Is a joining bonus worth counting in an offer?
Count it at less than face value. It is usually repayable in full if you leave within twelve or eighteen months, and typically calculated on the gross amount — meaning you repay money you never received after tax. It is a one-time payment being used to make a recurring number look larger.
What notice period should I accept?
Ninety days is common in India and is the clause most likely to cost you a future opportunity, since many employers will not wait that long. Check whether a buyout is permitted, at what rate, and whether the employer must accept it or merely may. A shorter notice period has real value and is often negotiable when salary is not.
Is gratuity part of my salary?
No. It accrues at 4.81% of Basic and is usually shown inside CTC, but it is paid only on separation after five years of continuous service — one year for fixed-term employees. Treating it as current income overstates what an offer pays you now.
Can I negotiate the structure rather than the CTC?
Often yes, and it is frequently easier. A fixed CTC is set by budget and band; the split between fixed and variable, the PF mode, and the guarantee on year-one variable are policy choices with more room in them. Converting variable into fixed at the same CTC raises your monthly pay without costing the employer more.
What should I compare when I have two offers?
Fixed CTC first, then monthly in-hand for each on identical assumptions, then conditional components valued at a realistic payout rate rather than 100%, then the clauses — notice period, clawbacks, probation terms. The headline CTC should be the last thing you look at, not the first.
Does my state change what an offer pays?
Yes, twice over. Professional Tax is a state levy and varies by about ₹208 a month between the highest and lowest states. And your city sets the HRA percentage — 50% of Basic in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad, 40% everywhere else — which matters if you are in the old tax regime.
Calculators
- In-hand salary calculator — what a package actually pays each month
- Salary breakup calculator — the full structure, and what changing it does
- Income tax calculator — old and new regime side by side
- PF / EPF calculator · Professional Tax calculator · HRA exemption calculator
Notes and Disclaimer
Figures are produced by the calculators linked above on stated assumptions: FY 2026-27, new tax regime, Basic at 50% of total remuneration, metro city, Karnataka Professional Tax, and PF on the ₹25,000 statutory ceiling except where the comparison states otherwise. The EPF wage ceiling of ₹25,000 took effect on 17 September 2026 under notification S.O. 5109(E). Gratuity accrual of 4.81% and the five-year qualifying period follow Section 53 of the Code on Social Security, 2020, with one year for fixed-term employees.
This is general guidance, not legal, tax or financial advice. Offer terms, clawback provisions and notice periods are contractual and vary by employer; enforceability depends on the drafting and the applicable state law. Have any clause you are unsure about reviewed before you sign.
Last verified for FY 2026-27 rules: September 2026.