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First of all, it is highly unlikely to get an in-hand salary of 1L for 14LPA CTC. It can never be 1.2L as can be seen from simple maths (1.2 * 12 = 14.4).
Coming to the sentiment of the question. It is very much possible that while the CTC difference seems vast, the in-hand salary difference isn’t much.
Reasons it can happen:
Check the basic pay
The 25L CTC may have higher basic pay. This directly affects the in-hand salary as components such as PF are dependent on it.
For the same CTC, if the basic is higher from Employer 1 than Employer 2, you’ll receive less in-hand from Employer 1. This is however not a bad thing (unless you are very thorough with your investments), as the PF is probably the safest investment option with decent returns.
- Does your offer of 25L CTC contain any 1-time bonus? If yes, you’ll of course get it just 1 time or in the timeframe defined in the offer letter, and will not reflect in your monthly payslips.
Does the 25L CTC include the company stocks?
- If yes, they will be given to you in stocks at whatever time interval is defined in your offer letter instead of monthly in-hand. If the company does well, the stock price increases, and you are benefitted. Therefore make sure you do your bit of helping the company grow and you grow with it.
Have you opted for ESOP?
- If yes, again, a good chunk of the CTC may be utilized to purchase company stocks. Furthermore, an investment and an incentive for you to work hard for your company.
With higher CTC, you may be moving to higher tax brackets. Read the tax rates on the income tax department's website to estimate how much will you be taxed. (Income Tax Department (incometaxindia.gov.in))
Have you opted for any tax-saving measures? With the investments you make for yourself and your family, the tax department allows you some rebates. They can be for LIC, Insurance, PF, etc. Read about it, watch youtube videos, or even go to your trusted CA and get a consultation on how can you save TAX.
Make sure you declare the use of flexible benefits (such as HRA, LTA, etc) if your company allows it.
Re-read your offer letter clearly
It will clearly tell you what you’ll be getting.
Sometimes the offer letters are framed in a way that gives a perception of a higher package when that may not be the case.
For. e.g, very few companies explicitly tell that the Employers share of the PF is a separate component not listed in the salary structure. If they have not explicitly pointed this out, then the employer’s share is also a part of the CTC, i/e/ ~24% of your basic will be deposited in your PF account (Again, not a bad thing, forces you to take some wise decisions if you are not sound with your investments)
CTC means Cost to the Company. It is the amount that the company has spent on you. How much goes to other entities such as the income tax department, PF account, company stocks, etc, is a different thing. Always take time to read the offer letter very carefully and do ask HR in case you have any doubts.
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