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?
- Basic Salary
- Dearness Allowance (DA)
- Conveyance allowance
- House Rent Allowance (HRA)
- Medical allowance
- Leave Travel Allowance or Concession (LTA / LTC)
- Vehicle Allowance
- Incentives or Bonuses
- 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
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|
|House rent allowance||75,000||45,000|
|PF (12% of basic salary)||57,750|
|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 online calculators like by AmbitionBox also available to calculate things like take-home salary.
I hope this blog helps you learn about CTC. To know more;
Video Interviews can simplify your hiring
Don’t let a packed schedule be a hindrance in recruitment. Use structured interviews with the power of video to screen applicants. Understand the communication skills, motivation, and job skills using video interviews.
Complete Guide to Pre-Employment Testing
Move over from pen-paper based tests and manually checked assignments to pre-employment assessments. Democratize your organization hiring by screening for skills before you interview.
How can Employers adapt to Remote Hiring
With most jobs going remote, your best applicants could be in Melbourne or Miami. From remote screening and virtual interviews to remote onboarding, Learn the best practices to get started.