XOBIPEDIA
HR Glossary
What is Cost to Company (CTC) in Salary?
Cost to Company or CTC is the yearly expenditure spent by a company on its employee. This term is most commonly used in Asian countries, like India, Nepal, and parts of Africa.
What are the different components of CTC?
They are:
- Basic Salary
- Allowances
- Dearness Allowance (DA)
- Conveyance allowance
- House Rent Allowance (HRA)
- Medical allowance
- Leave Travel Allowance or Concession (LTA / LTC)
- Vehicle Allowance
- Incentives or Bonuses
- Benefits
- Medical Insurance
- Provident Funds
- Special benefits (like a laptop, mobile phone)
What is the difference between CTC, Gross Salary, and Net Salary?
| CTC | Gross Salary | Net Salary |
| CTC is the total package of the salary of an employee. It is the total expenses that the employer is willing to spend for an employee during a financial year. | Gross Salary is the amount of salary after adding all benefits, allowances, and deducting any tax. | Net Salary is the amount of salary that an employee takes home. |
| Formula: CTC = Gross Salary + Benefits. | Gross salary = Basic Salary + Allowances | Net salary = Gross salary – (Income tax + PPF + Professional tax) |
What components are taxable, non-taxable, and partially taxable in CTC?
| Fully Taxable | Partially Taxable | Non-Taxable |
| – Dearness allowance – Entertainment allowance This allowance is completely taxable for every private-sector employee. – Overtime allowance – City compensatory allowance – Interim allowance – Project allowance – Tiffin/meals allowance – Uniform allowance – Cash allowance – Non-practicing allowance – Warden allowance – Servant allowance | – HRA: Only if an individual doesn’t live in a rented space, this allowance is fully taxable. – Fixed medical allowance: Only if the medical expense exceeds a certain amount, then it becomes taxable. – Special allowance: Since this allowance does not fall within the category of a perquisite and is partially taxable. – Conveyance allowance: If a conveyance allowance is less than ₹ 1,600, then it will be considered non-taxable, any amount more than that will be taxable as per the income tax act. – Entertainment allowance: A government employee can claim exemption on this tax, up to a certain amount. | – HRA – Conveyance allowance |
Example of a CTC
| Component of salary | Amount (₹) | Taxable amount |
| Basic salary | 250,000 | 250,000 |
| House rent allowance | 75,000 | 45,000 |
| Conveyance allowance | 10,000 | 0 |
| Entertainment allowance | 8,000 | 8,000 |
| Overtime allowance | 8,000 | 8,000 |
| Medical reimbursements | 15,000 | 0 |
| Gross salary | 366,000 | 3,11,000 |
| Medical insurance | 6,000 | |
| PF (12% of basic salary) | 57,750 | |
| Other benefits | 60,000 | |
| CTC = gross salary + benefit | 489,750 |
The above table represents is a sample structure and not based on any particular companies salary structure. And salary structures may vary from one company to another.
There are some calculator online like by AmbitionBox also available to calculate things like take-home salary.
I hope this blog helps you learn about CTC. To know more;
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