Accept a counter offer only after you compare what each side pays over the next two years, not the headline hike: fixed pay in hand, variable pay, any retention bonus after tax and its clawback, and the salary your next appraisal is worked on. A ₹21 lakh offer pays Sneha ₹56,597 more over two years than a ₹19.5 lakh counter with a ₹2,00,000 retention bonus, but the counter comes out ahead if the new employer pays 70% of target variable while the current one pays in full, or skips her first appraisal. Pay is only part of it: a counter does not change whatever else made her start looking, and the clawback ties her in for 12 months after the bonus.
Why is the CTC hike the wrong comparison?
A salary hike comparison on CTC alone treats every rupee the same. Part of each CTC is employer PF and gratuity, never paid monthly; part is variable, paid yearly and often below target. A retention bonus is paid once, taxed, and tied to staying. A raise is different: every later appraisal builds on it, so the gap keeps widening.
How do the counter and the offer compare for Sneha over two years?
Sneha's CTC is ₹16,00,000. A new employer offers ₹21,00,000. Her employer counters with ₹19,50,000 plus a ₹2,00,000 retention bonus paid after one more year, repayable if she leaves within 12 months of payment.
All three figures are CTCs. This example assumes 10% of each is target variable, paid yearly at 100% of target, though large IT employers paid roughly 65% to 100% of target in FY 2025-26, as variable pay after tax sets out.
It also assumes an 8% appraisal after year 1 at both employers, and FY 2026-27 new-regime tax, the latest known, in both years. Fixed pay follows CTC vs in hand salary: PF on full wages, gratuity inside CTC, ₹2,500 professional tax.
On the counter, ₹17,55,000 of fixed CTC leaves ₹16,10,956 of gross pay once employer PF and gratuity (₹1,44,044) come out. Her own PF (₹1,02,827), professional tax and income tax (₹1,14,809) leave ₹13,90,820 a year, about ₹1,15,900 a month. The offer leaves about ₹1,23,700 a month, and her ₹16 lakh today about ₹98,900.
| Sneha, year by year | Counter | Offer |
|---|---|---|
| Year 1 CTC | ₹19,50,000 | ₹21,00,000 |
| Year 1 fixed pay in hand | ₹13,90,820 | ₹14,84,385 |
| Year 1 variable after tax | ₹1,57,770 | ₹1,66,320 |
| Year 2 CTC after an 8% appraisal | ₹21,06,000 | ₹22,68,000 |
| Year 2 fixed pay in hand | ₹14,87,995 | ₹15,85,448 |
| Year 2 variable after tax | ₹1,66,795 | ₹1,78,301 |
| Retention bonus after tax | ₹1,54,477 | nil |
| Year 3 CTC after another 8% | ₹22,74,480 | ₹24,49,440 |
| Two years in hand | ₹33,57,857 | ₹34,14,454 |
The offer pays ₹1,02,115 more in year 1. In year 2 the retention bonus puts the counter ₹45,518 ahead. Over two years the offer leads by ₹56,597, and puts about ₹32,900 more into her PF on top.
The offer's extra pay is taxed at 20.8% with cess, not the 31.2% of the top slab: with variable, her year-1 taxable income is ₹17,30,956 on the counter and ₹18,69,876 on the offer, both inside the 20% slab. The bonus is salary in the year it falls due or is paid, whichever is earlier, and lifts year-2 taxable income from ₹18,75,433 to ₹20,75,433: ₹1,24,567 at 20.8% and ₹75,433 at 26%, ₹45,523 of tax, or 22.8%.
What would turn the result around?
If the new employer pays 70% of target in both years while the current one pays 100%, the counter ends about ₹45,900 ahead. If both pay 70%, the offer still leads, by about ₹47,200.
If the new employer skips Sneha's first appraisal, the counter leads by ₹56,447 over two years, and her year-3 base on the offer, ₹22,68,000, is below the counter's ₹22,74,480.
Or the other way: if her employer treats the counter as next year's appraisal paid early, year-2 CTC stays at ₹19,50,000 and the offer leads by ₹1,58,874, with a year-3 base of ₹24,49,440 against ₹21,06,000.
What does the retention bonus cost if you leave within the clawback?
The counter's ₹1,54,477 is hers only if she stays the full two years; the offer's lead has no such condition. If she takes the counter and resigns five months after the bonus, seven of 12 months are unserved. A pro rata clause on the net amount takes back ₹90,112; on the gross amount ₹1,16,667, about ₹26,600 of it tax that never reached her. Full recovery: ₹2,00,000 gross or ₹1,54,477 net.
If she repays in a later tax year, the Income-tax Act has no specific deduction for it, so that tax usually stays paid; joining bonus clawback covers the same-year case and the final settlement.
What else belongs in a job offer comparison?
Ask in writing whether the counter replaces her next appraisal, which cycle the new employer puts her in, each side's recent variable payouts, and the clawback's basis.
If either side carries unvested ESOPs, add them yourself; ESOPs if you leave before vesting shows what lapses on exit. If the new employer wants her before her notice ends, a buyout comes off the offer's first year unless it is reimbursed, and notice period buyout works out that cost and its tax.
Dhi answers from your own numbers what a new salary, a retention bonus or a repayment does to your cash flow and net worth. Dhi maps your investments to your goals, nudges you when something needs attention, and earns no commissions.
Frequently asked questions
This is general information for salaried individuals in India, not personalised financial advice.
