It's true: ₹10L salary can make you richer than ₹20L salary

It sounds absurd, doesn’t it? How could a salary that’s half as much possibly be better? In India’s urban white-collar workforce, a Rs 20 lakh CTC has become commonplace, especially in tech, consulting and BFSI circles. Yet, many in this bracket often feel no richer than their Rs 10 lakh peers. That’s because income does not exist in a vacuum.

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It brings along new temptations, responsibilities and costs — many of them self-inflicted. Let’s unpack this.

1. Gross vs Reality check

The term "Cost to Company" (CTC) often paints a rosy picture. A Rs 20 lakh salary offer may sound life-changing on paper, but the devil lies in the breakdown. Here’s how a CTC can get carved up:

In this case, your in-hand pay is Rs 1.2 lakh but you assume it’s Rs 1.7 lakh (based on CTC), you’re setting yourself up for cashflow stress, if you are mentally spending the CTC amount when buying a house, planning a vacation or even estimating loan eligibility.

2. Lifestyle creep is real

The Rs 10 lakh earner might live in a modest one-BHK flat, rely on public transport and enjoy one dinner out a week. She budgets carefully, tracks expenses and manages to save or invest at least 30 per cent of her take-home income.

Now contrast this with someone earning Rs 20 lakh. She’s upgraded to a 3 BHK apartment in a gated society with Rs 50,000 monthly rent, commutes in a car with Rs 15,000 EMI, orders food frequently and is now considering a foreign vacation on EMIs.

What’s happening here is a textbook case of lifestyle inflation. Each hike in income leads to a corresponding—or often disproportionate—increase in spending. That’s because lifestyle-related expenses (rent, dining, travel, gadgets) tend to grow faster than core essentials. Worse, many of these new costs are fixed and recurring—EMIs, rent, OTT subscriptions—quietly draining cash flows every month.

For instance, the Rs 20 lakh earner may be left with Rs 40,000 to invest each month (after all expenses), while the Rs 10 lakh earner may be able to save Rs 30,000.

The gap is surprisingly small. What’s more, if the lower earner steps up her SIPs annually (because she has more legroom to do so if she keeps the lifestyle inflation in check), she could even overtake the high earner in long-term wealth accumulation.

In short, lifestyle creep doesn't just steal money; it steals financial freedom.

3. The hidden tax on the affluent

This is where behavioural finance kicks in. The more you earn, the more you're expected—by peers, relatives, even social media—to live a certain way. And many oblige:

• Business class instead of economy
• Luxury apartments with club memberships
• iPhones and MacBooks as default gear
• International holidays instead of Indian getaways

This is called “signalling”—where spending is used to convey success. And it’s sticky. Once you cross into a lifestyle tier, it’s psychologically hard to downgrade. So even as income rises, the pressure to spend to belong increases faster.

But people who control lifestyle creep, stay invested and avoid debt traps often outperform peers in long-term financial well-being, regardless of salary.

4. The tax structure is not linear

The Rs 10 lakh earner can take full advantage of the new tax regime. For those unaware, those earning up to Rs 12.75 lakh now pay zero tax under the new tax regime.

The Rs 20 lakh earner, on the other hand, finds herself in a high tax slab — and even after exhausting every deduction, still pays a disproportionately high amount in taxes.

5. Family responsibilities grow with age and income

Often, the higher earner—say someone making Rs 20 lakh a year—is in her 30s or 40s. She’s at a stage in life where financial responsibilities stack up fast. A home loan EMI, school fees for two kids in private school, insurance premiums, medical expenses for ageing parents, and the rising cost of maintaining a certain lifestyle all compete for her paycheck. Even if she’s earning more, a large portion of that income is already earmarked before the month even begins.

On the other hand, a Rs 10 lakh earner in her 20s may still live with her parents, splitting household expenses. With no kids, no housing loan, and fewer dependants, her monthly obligations are lower. She can direct a larger portion of her income towards investments and savings.

6. Relocation flips the equation

A common reason for the income jump is relocation to a metro city. But this also means moving away from parental support, paying rent, cooking via Swiggy and no longer splitting utilities. A Rs 20 lakh salary in Mumbai with rent, fuel and lifestyle overheads might leave you with less than a Rs 10 lakh salary in Delhi NCR with no rent and home-cooked meals.

7. Savings capacity, not income, builds wealth

Let’s look at two fictional personas:

• Priya, earning Rs 20 lakh a year. Her expenses are high: rent, car EMI, school fees, lifestyle. Even with discipline, she manages to save and invest about 20 per cent of her income, which roughly equates to a monthly SIP of Rs 33,000. (We’re being generous by ignoring lifestyle inflation, bonuses that vanish into EMIs and the CTC-to-take-home gap for now).
• Now meet Megha. She earns Rs 10 lakh a year and lives with her parents, sharing basic household costs. With no EMIs or major outgoings, she’s able to save 30 per cent of her income (Rs 25,000 each month) and invests it consistently through SIPs. Her low overheads give her the flexibility to increase her SIP by 5 per cent every year, more in the early years, and at a gentler pace later as responsibilities grow. This kind of headroom is something Priya simply doesn’t have, as her expenses climb with every pay hike.

Here’s how their wealth stacks up in 20 years (assuming 12 per cent return for both):

By the end of the 20th year, Megha is wealthier, despite earning considerably less than Priya.

Bottom line? The size of your paycheque matters less than the structure of your life. A comfortable (not lavish) lifestyle, moderate ambitions and intentional saving habits can make a lower salary a better wealth-building tool.

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This article was originally published on July 16, 2025.