- On ₹20 lakh, a 30% hike raises your take-home by 24.7%. You keep about ₹66 of every extra ₹100 of CTC; tax takes most of the rest.
- Below about ₹13 lakh of CTC there is no income tax to pay, so a raise reaches your account almost entirely; only the PF and gratuity share is held back.
- With 6% inflation, a 6% raise is a small pay cut in buying power once tax is counted.
- A switch matters because raises compound. In simple arithmetic, a 30% jump now can leave you about 20% ahead after five years of equal raises.
Appraisal letters and offer letters both speak in percentages of CTC. Your landlord, your SIP and your grocery bill speak in rupees per month. The gap between the two is bigger than most people think, and it grows as you earn more.
Where an extra ₹6 lakh of CTC actually goes
Take a ₹20 lakh CTC that becomes ₹26 lakh, a 30% hike. That is ₹6 lakh more a year on paper. Here is where it lands:
So the take-home goes from ₹1,33,558 to ₹1,66,578 a month: +₹33,020, or 24.7%. The PF part is still your money, but it is locked away for later, so it won’t help with this month’s rent.
How much of a 30% hike survives, by salary
Because India’s tax is progressive, the same percentage raise is taxed more heavily the more you earn:
| CTC before → after | Monthly in-hand before → after | Take-home rise | Kept per extra ₹100 |
|---|---|---|---|
| ₹10 L → ₹13 L | ₹73,530 → ₹95,649 | 30.1% | ₹88 |
| ₹20 L → ₹26 L | ₹1,33,558 → ₹1,66,578 | 24.7% | ₹66 |
| ₹30 L → ₹39 L | ₹1,86,585 → ₹2,31,115 | 23.9% | ₹59 |
At ₹10 lakh the whole raise stays below the ₹12 lakh rebate limit, so no tax is due before or after. The “missing” ₹12 of every ₹100 is PF and gratuity. Higher up, the slab rates take a growing share.
Watch the ₹13–14.5 lakh strip: just above the rebate limit, nearly every extra rupee goes in tax. A raise from ₹13.6 lakh to ₹14.4 lakh CTC leaves the monthly take-home flat. Here’s why, and what helps.
The raise that is really a pay cut
A raise should be judged against how much prices rose while you waited for it. With inflation at 6%, here is what a typical appraisal on ₹18 lakh does to your buying power:
| Appraisal | Take-home rise | Buying power after 6% inflation |
|---|---|---|
| ₹18 L, 6% hike | 5.1% | −0.9% |
| ₹18 L, 8% hike | 6.8% | +0.7% |
| ₹25 L, 10% hike | 8.1% | +1.9% |
The take-home rises by 5.1%, less than the 6% headline because of tax. Prices rose 6%. In real terms, you can buy slightly less than last year.
Check your appraisal →This is not an argument to be unhappy with every raise. It is a way to talk about it clearly: “after inflation and tax, this keeps me where I was” is a stronger line in a review than “I expected more”.
Why a job switch can matter so much
Raises compound, so one big jump changes every later raise as well. Here is the simple arithmetic for a ₹18 lakh CTC over five years, with 8% raises every year after the first:
| Year 1 raise | CTC after 5 years | |
|---|---|---|
| Stay: 8% every year | 8% | ₹26.4 lakh |
| Switch: 30% now, then 8% a year | 30% | ₹31.8 lakh |
The switch leaves you about ₹5.4 lakh of CTC ahead in year five, and ahead every year before it. That is why a well-timed switch is often worth more than several good appraisals. It is also why the first offer number in a switch deserves careful negotiation: everything after it is built on top.
A switch has costs too: a bonus you forfeit, unvested ESOPs, a notice period, a new probation. Put the bonus and the ESOPs into the offer comparison as money you give up, so you compare like with like.
How to judge any raise in two minutes
- Open the hike calculator and enter your current CTC and the hike, or the new CTC directly.
- Read the monthly take-home before and after, not the CTC.
- Check “after inflation” to see whether your buying power went up.
- If the offer includes a bigger variable share, lower it to what is usually paid, using the salary calculator.
Frequently asked questions
Why is my in-hand hike lower than my CTC hike?
Because part of the extra CTC goes to income tax, PF and gratuity. At higher salaries, the extra income is taxed at your top slab rate, so the take-home rises by less than the headline percentage.
What is a good salary hike in India?
A raise that beats inflation after tax keeps your buying power. With 6% inflation, that usually needs a raise of about 7% or more at middle incomes. Switching jobs often brings bigger jumps than internal appraisals.
Can a raise reduce my take-home?
Monthly take-home can stay flat for a raise just above the ₹12 lakh rebate limit, where marginal relief takes almost all of the extra income in tax. Outside that strip, a raise always increases take-home, though by less than the CTC rise.
Is it better to take a higher fixed pay or a higher variable pay?
Fixed pay is certain and counts towards PF if it raises your basic. Variable pay depends on ratings and company results. Compare both in take-home terms with a realistic payout.
Got a raise or an offer?
See exactly what it adds to your account each month, and after inflation.
Open the hike calculator →Examples use the salary hike calculator’s default structure (basic 40% of CTC, PF on full basic, gratuity inside CTC, ₹200 a month professional tax) with the better tax regime, Tax Year 2026-27. The five-year switch figures are simple arithmetic at the stated raises, not a forecast. Your payslip is the final word.