Cost to Company (CTC)CTC is the term used to refer to the total amount that your employer spends on you. It includes a basic salary, multiple allowances, savings contributions and more, varying from company to company. An example of CTC in a hypothetical company may be:
Basic salary + House rent allowance + Conveyance + Education allowance
The only reason why a salary is broken up into these allowances is to save on taxes as tax deductions are applicable on house rent and other such categories.
In-hand SalaryIn-hand Salary is the amount credited to the employee after deducting various taxes, savings contribution from your part and any other amount as per your company policy.
For example, in the same hypothetical company as before,
- The employer opens a mandatory EPF account
- A professional tax is deducted from your Salary as per Government regulations, and
- A small amount is deducted towards group medical insurance in a particular month
Basic salary + House rent allowance + Conveyance + Education allowance – (EPF contribution + Professional tax + Medical)
Deductions from Gross Salary
- Employee’s Provident Fund Contribution 12% of your basic salary or 12% of Rs.15000, whichever is lower.
- Professional Tax It is a tax collected by the state in which you are earning the Salary. It cannot exceed Rs.2500 per year. However, how much will be deducted from you is dependent on your company norms.
- Medical Depending on the medical plan for which your employer has opted to do the group medical insurance, the amount deducted for it will vary from company to company.
Only if you have all the numbers and figures available of all the deductive parameters, will you be able to calculate how much your In-Hand Salary would be, from beforehand. CTC is the sum-total of whatever combined total amount your company has to spend for you directly or indirectly.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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