What is CTC – Difference between Gross and Net Salary

In today’s word a large number of people are doing Job and earing salary for their job role or service so every one should know about the CTC. People are confuse in CTC, Gross Salary, Net Salary or Take home Salary. They are not able to understand the exact difference in CTC, Gross and Net Home Salary. So here we will learn all these concept one by one.

What is CTC(Cost to Company)

CTC is the total cost bear by employer to hire the resources, CTC is combination of Allowance and Benefit, such allowance is paid through the salary but some allowance are perquisites to employee.

In short CTC is amount which company give you for your Job role but the net salary which you get is not exact the CTC you have been offered. Because that CTC contain some fixed allowance and some employee benefits or retirals benefit like Gratuity , Provident Fund, Mediclaim or any other perquisites.

Components of CTC

1.Basic Salary :- This is the Primary Component of CTC. Provident Fund and Gratuity is calculated on Basic Salary. It is fully Taxable Component.

2.Allowances :- There are some allowance which company provide in CTC component to meet their specific expenses and for tax benefits.

• House Rent Allowance (HRA) :- This component helps to cover the expenses of Rented house, if employee is living in rented house then he can take the benefit in income tax as well in Sec 10.
• Travel Allowance :- This component offers to travel for employees , you must heard about the LTA, many employee take benefit in taxation by providing the LTA bills.
• Medical Allowance:-In the same way it is for Medical expense which company provide to their employees in CTC.
• Other Allowance :- There are other allowance like Performance based incentive (PLI).

There are also lots of component which differ from organization to organization their structured is designed in such a way so that employees can take maximum benefits.

3.Perquisite :- Perquisites are non cash benefits for example company provide Car for their employees, subsidize meals or free accommodation. These are the some examples of Perquisites.

4.Provident Fund :- In CTC employer contribute some parts of Provident fund, generally the PF contribution is 12 percent of Basic some organization are following ceiling of 1800 PF.

5.Gratuity :- This is retiral component of CTC, this amount is provided to employee for their long term service , there is specific section to provide the gratuity to employee .Generally 4.81 percentage we consider in CTC.

6.Insurance :- Company Provide Insurance like term insurance , Accidental insurance it is part of CTC.

Here is one example of CTC how it looks and categorized also for your reference i have attached here CTC calculator which you can downlead.

What is Gross Salary

Gross Salary is a amount which employee earns before any deduction are made. It incudes employees basic Salary, Allowances , Bonus, Commission and other payments. So in short by adding the Basic Salary, House Rent allowance, LTA etc but it does not include the deductions like PF,PT, TDS etc. So please do not consider as this amount you will receive as monthly salary because there are some statutory deduction are there which we consider post that deductions you will get the salary.

What is Net Salary

So as i said above about the gross salary , in that salary there are some deduction we made which are statutory (PF, TDS, ESIC, LWF) and non statutory deduction (Loan ,Salary Advance Etc).

Net Salary = Gross Salary – (PF+ Tax+ ESIC+ LWF+ Other Deductions)

Let us take one Example Mr. X has month CTC 1,35,565 so here is his monthly Salary.

So here we see how CTC works and the difference among CTC , Gross and Net Take home Salary. also we cover the CTC Calculator. Still if you have any doubt you can write us we will try to cover your questions.