18 LPA in Hand Salary: A Complete Guide

Money has been the biggest motivator when we think about our career growth, job profiles, or switching companies. But one of the most important questions raised in the Indian market today is the “If I offered an 18 LPA salary package, then how much will I actually get in hand? It’s natural to get excited when you see a figure of 18 LPA written in your offer letter. But what’s written on the paper and what amount comes in your bank accounts every month after all the deductions is a different story. This difference is due to various components of the 18 LPA in hand salary, such as deductions, tax payments, or company-specific policies. In this informational guide, we will break down what an 18 LPA salary actually means, how much you expect in-hand salary, how various deductions impact your salary, and what the tax saving options are. So, let’s move on and dive into it step by step. 

What Is Actually the CTC, and Why Is It Important?

CTC, also known as the Cost to Company, is the total annual expense a company incurs for an employee. It includes various components, such as basic salary, various allowances, incentives, and the employer contribution. Although CTC provides an overall view of the compensation package, it’s not an actual amount that is credited in the employee’s bank account every month. However, understanding the CTC breakdown helps you in estimating the 18 LPA in-hand salary more easily.   

Ctc Components Breakdown for the 18 LPA

1. Basic Salary- Basic Salary forms almost 50% of the total CTC. For an 18 LPA package, your basic salary would be approximately Rs 9 LPA. 
2. Various Allowances- These allowances cover various expenses, such as House Rent Allowance (HRA), Conveyance Allowances, Medical Allowances, and other allowances. These types of expenses involve 30% of your CTC salary. In this case, your allowance would amount to Rs 5.4 LPA 
3. Performance-Based Incentives- Your bonuses and various incentives, which may vary depending on your company’s policies and your performance. They generally involve around 20% of your CTC salary, which is approximately Rs 3.6 Lakhs per annum. 
4. Retirement Benefits- Your retirement benefits include the EPF (Employee Provident Fund) and other pension schemes. These typically include 10% of your CTC salary, amounting to approximately Rs 1.8 LPA. 

Based on the above breakdown: 

Total CTC: Basic Salary + Allowances + Performance-Based Incentive + Retirement Benefits =
(Rs 9 LPA + 5.4 LPA + 3.6 LPA + 1.8 LPA)= 19.8 

18 Lpa in Hand Salary: Complete Breakdown 

Before we move on to the deductions section, here is a quick snapshot of what the 18 LPA in hand salary looks like in 2025, based on the typical salary structure in India. So, let’s have a look: 

For an 18 LPA CTC, your in-hand salary is about Rs 1,32,000 approximately every month, assuming a 20% deduction rate. But please make sure that this may vary according to the company’s policy, or according to the tax slab. 

Various Deductions That Impact Your 18 LPA in Hand Salary 

When you earn a salary, there are a few deductions that reduce your take-home pay, which are as follows:

1. Income Tax: A portion of your salary is deducted as income tax based on the government’s tax slabs. For someone earning around 18 LPA, most of the income falls in the 20% tax slab, though exemptions and rebates can help lower the actual tax you pay.
2. Employee Provident Fund (EPF): Both you and your employer contribute 12% of your basic salary to your provident fund. This amount gets saved for your future, so while it reduces your in-hand salary today, it builds your retirement savings.
3. Professional Tax: This is a small tax charged by some state governments. It’s usually not more than ₹2,500 a year, so it doesn’t make a huge dent in your salary.
4. Other Deductions: Depending on your company, there may be other small deductions like health insurance, life insurance, or contributions towards company benefits. These not only reduce your salary a bit but also provide security and support when needed.

New Tax Slab Rates Available for the Financial Year 2025-2026

The new tax slab rates for the financial year 2025-2026 are as follows: 

Old Tax Slab Rates Available for the Financial Year 2024-2025

The old tax slab rates for the financial year 2024-2025 are as follows: 

How Can an Individual Save Taxes for an Income of 18 LPA?

Below are some tax-saving options under the old and new tax regimes for having the 18 LPA in hand salary: 

1. Tax Saving Benefits Provided to the Employee by an Employer: 

• Telephone at home–  If your employer provides a landline or mobile connection at your residence, it isn’t treated as taxable income.
• Travel facility– When employers provide free or discounted travel by rail or air, it is considered a perk for employees.
• Insurance premiums–  If your employer pays the premiums for a group insurance scheme, it is not taxed in your hands.
• Personal accident policy-  Usually taken by employers for business reasons, so employees don’t need to include this in their taxable salary.
• Recreational facilities– Things like club memberships offered by the company are treated as benefits.
• Medical expenses– Reimbursements for certain specified diseases are exempt.
• Health insurance– If your employer pays for your health insurance, it is not taxable, and you can also claim deductions under Section 80D.

However, some benefits are taxable if you are a director or if you hold more than 20% stake in the company. These include:

• Domestic help, like a sweeper or gardener paid for by the employer.
  
• Free or discounted travel tickets.
  
• Use of a company car for personal purposes.
  
• Gas, electricity, or water is provided at your home by the employer.
  
• Free or concessional education for your children or dependents.

2. Employer’s Contribution to the NPS u/s or 80 CCD 2: 

• Section 80 CCD(2) allows the deduction for the employer contribution in the National Pension Scheme (NPS). 

• The good thing is that this tax-saving option is available in both the old as well as the new tax regimes. Although the limit for the deduction depends on the tax regimes chosen. 

• The table given below gives you a brief example of the quantum of deductions available under the old as well as the new tax regimes, for the contribution made by the employer in the NPS Scheme under Section 80 CCD(2). 

The above table shows the maximum contribution limit to the NPS. 

3. Gift Taxation

• The gifts received by the employee, either in cash or in kind, if the amount or the value of the gift received is up to Rs 50,000, are not taxable under section 56 of the Income Tax Act. 
•  If the amount of the gift received exceeds Rs 50,000, then the entire amount is taxable. 
• This tax-saving option is also available for the old and new tax regimes. 

4. Deduction for the Interest on borrowing the Let Out Property

• If an individual has rented out his property (either commercial or residential), a tax deduction under Section 24 can be availed. 

• The interest paid on the amount borrowed to construct or purchase the immovable property can be allowed as a deduction. 

• However, there is no maximum limit set for claiming this deduction. 

5) Gratuity and Leave Encashment 

• Exemption is allowed for the amount received as a gratuity and your leave encashment at the end of your employment tenure. In this, an employee may retire or terminate their employment before their retirement. 

• The Income Tax Act provides the maximum amount that is eligible for the deduction for the gratuity and the leave encashments. This exemption also equally applies to the old as well as the new tax regimes. 

6) Deduction on Additional Employee Cost

If a business hires new employees, it gets a tax benefit under Section 80JJA. No matter whether the business is following the old tax regime or the new one, it can claim this deduction. The benefit is simple: 30% of the money spent on hiring additional employees can be claimed as a deduction from taxable income. This encourages businesses to generate more jobs.

7) Deduction for Agniveer Corpus Fund

Individuals who join the armed forces under the Agnipath Scheme have a special benefit. The contribution made by the Central Government to the Agniveer Corpus Fund in their name is fully allowed as a deduction under Section 80CCH(2).

What makes it even better is:

• There is no upper limit on this deduction.
• The entire contribution by the government is deductible.
• This benefit is available under both the old and new tax regimes.

How to Make the Most of an 18 Lpa in Hand Salary

Earning well is one thing, but managing it effectively is another big thing. Below are some cost-effective ways through which you can make the most of an 18 LPA in hand salary: 

• Use smart tax-saving planning, such as investing your money in PF, ELSS, PPF, or other insurance schemes. You can also claim your HRA exemption if you live in a rented house. 
• Create your effective monthly budget. You can use the 50-30-20 rule, in hich 50% is your basic needs, 30% is your wants, and 20% is your savings. 
• You can also invest your money in smart tax-saving options like mutual funds, index funds, or stocks. 
• You can also build an emergency fund covering almost 6 months of your expenses. Do your smart retirement planning by investing your money in long-term investments. 

Current and Frequently Looked-For LPA Pay in 2025

FAQ’s: 

1) What Is Your In-Hand Salary for the 18 LPA?

Your in-hand salary for the 18 LPA is approximately Rs 1,32,000 every month after all the deductions. 

2) Is 18 Lakhs Per Annum a Good Salary? 

Yes, an annual salary of 18 lakhs (₹18 LPA) is considered a good salary in India, providing a comfortable lifestyle to an individual. 

3) How Much Tax Will I Pay If I Have an 18 Lpa Salary? 

According to the new tax regime, an individual has to pay 20% tax on an 18 LPA salary structure. 

4) What Is 30% of 18 LPA? 

Assuming these allowances amount to around 30% of the CTC, the total amount would be 5.4 LPA.