What is CTC

Cost to Company (CTC) is the amount which an employer spends to hire and employee by creating a relationship of employee and employer.

Employee gets CTC as per his or her profile and level of skill.

The CTC amount which a company pay to her employees is basically the sum amount of Direct Benefits (Fixed Salary), Indirect Benefits (Perquisites reimburse by Employer on behalf of employees) and Savings Contributions (EPF, ESIC)

Here is the breakdown of CTC part in details

Direct Benefits (DB)– This is the amount which employee got as fixed component on monthly basis in his gross salary and this gross salary is subject to the government tax For Example – Basic, Dearness Allowance, House Rent Allowance, LTA etc.

Indirect Benefits (IB) – This is additional benefit (Non-Monetary) which company provide to her employees and employee enjoy that benefit without paying for them although this is the benefit to employee hence company charged a perquisite value as per income tax rule.

Example – Interest Free Loan, Company Lease Accommodation etc.

Savings Contributions- It is again a monetary benefit which added to the employee CTC. Example EPFO contribution ESIC etc.

Analysis of CTC

Here I have taken an example of CTC to let you clearer about the bifurcations of CTC

Total CTC Yearly
CTC    1,100,000
  
Pay Heads Yearly INR CTC Bifurcation
 Basic Salary       440,000Direct Benefits
 House Rent Allowance       220,000Direct Benefits
 Personal Pay       1,54,369Direct Benefits
 LTA Reimbursement         36,667Direct Benefits
 Vehicle & Running Maintenance       100,000Direct Benefits
 Club & Entertainment         75,000Direct Benefits
 Gross Earning (A)    1,057,236 
 Employer Provident Fund         52,800Saving Contributions
 Gratuity          21,164Saving Contributions
 Total B         42,764 
 Total CTC (A+B)    1,100,000 

What is Gross Salary

Gross Salary is basically is amount paid to the employee before deduction like Tax, PT,PF,ESIC and any other deduction and it includes payments like Bonuses , Over Time Payment etc.

What is Net Salary or Take-Home Salary

We generally used to say Take-Home Salary to Net Salary. Net Salary is the amount which comes after deduction of PF,PT,ESIC,TDS and other deductions and this amount paid to the employee as Salary.

Take Home Salary = Gross Salary –  IT – PT – ESIC – (Other Deduction if any)

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