You must have seen you get the salary less than what is written in your offer letter. Or your company’s HR says you your salary is Rs. 17,000, but the in-hand salary is Rs. 15,000.
It is shocking, but why you get less salary than it is mentioned in the job offer letter?
Every company quotes you CTC, it is advisable to first calculate your net salary before accepting the offer, and otherwise, you will keep wondering.
Let’s us understand how to calculate your home take and what to calculate net salary, gross salary, and CTC.
Meaning of CTC and its full form
CTC means “Cost to Company.” The employer is under obligation to make some deductions from your salary like Employee provident fund (EPF) and deposit it to the government on your behalf. Besides that, he also gives you some perks and facilities. So, all the benefits you receive from your employer are directly or indirectly have to bear by the employer.
In short, the CTC salary is the total salary package of an employee. It shows the total amount of expenses a company is willing to spend on an employee.
Components of CTC salary
Now, another doubt arises in your mind is what are the things included in CTC salary? It includes the there types of benefits, i.e., Direct benefits, Indirect benefits, and contributions:
Direct benefits: Direct benefits are the amount paid to an employee annually:
- Basic salary (in-hand salary)
- Perks
- Reimbursements of Conveyance, Medical, Phone, Periodicals, meal, fuel allowance
- House rent allowance (HRA)
- Dearness Allowance (DA)
- Leave travel allowance (LTA)
Read more: Claim HRA with Rent Agreement and Rent Receipts
Read more: Leave Travel Concession (LTC)
Contributions: Contributions are the savings made by both employee and employer for the employee.
- Employer EPF contribution
- Employer gratuity contribution and NPS Contribution
Indirect benefits: Some employer charges indirect benefits, i.e., It is the amount that an employer pays on behalf of an employee. Make sure to ask your employer.
- Office space rent,
- Interest-free loans,
- Insurance premiums paid by employers
- Subsidized meals etc.
Example of CTC
Let’s say Mr Gupta’s CTC is Rs. 4,25,126. The components of his CTC is as below:
- Basic Salary: Rs. 2,05,000
- House Rent Allowance (HRA): Rs. 1,06,300
- Conveyance Allowance (CA): Rs. 19,200
- Medical Allowance: Rs. 15,000
- Employee Provident Fund (EPF): Rs. 21,600
- Gratuity: Rs. 31,026
- Special Allowance: Rs. 27,000
Gross salary Vs CTC Vs Net salary
CTC Salary: It is the cost to the company. When you include various benefits in gross salary, it is your CTC.
Gross salary: Gross salary is the salary that is mentioned on paper, i.e., job offer letter. It includes various types of deductions, i.e., TDS, professional tax, and PF.
Net salary (Home take): Net salary is the actual salary you receive in your bank account. After deducting all deductions from gross salary, the remaining amount is your net salary.
| Gross salary + Other benefits = CTC |
| Net salary + Deductions = Gross Salary |
Summing up, it is suggested to ask for home salary from the employer to avoid the the trap. Bargaining to increase CTC will not increase your home salary. Always bargain for the home salary that you are actually going to receive from the company.