Full Form of CTC
| Acronym |
Full-Form |
| CTC |
Cost To Company |
Definition
CTC is a term that defines the entire salary package of an employee. The entire amount of expenses spent by an employer on an employee for one year is indicated as the CTC. It is calculated by adding the salary to the value of all additional benefits received by an employee during the period of service.
For instance, if the salary of the employee is 60,000 and the company pays a further 5,000 for his or her insurance, then the CTC is 65,000. The entire CTC amount might not be received by the Employees directly.
Difference between CTC and payslips:
- In CTC many elements added to salaries like pension, health care and other allowances for entertainment, travel, and housing are added.
- The cash amount the worker receives directly is from the tax amount can be additionally deducted.
- CTC makes the companies reflect the incremental spending per employee more accurately.
Does CTC include PF?
As CTC is the salary package of an employee, it indicates the entire amount of expense spent by an employer for an employee in a year. Thus, mostly the CTC includes salary, bonus, leave allowance, house rent allowance, employer contribution of PF and medical reimbursements.
What is the essential salary for CTC?
The received salary is mostly 40% to 50% of CTC. Other components like PF, gratuity, bonus, and other benefits are determined on the idea of essential salary. The employee's CTC can be affected by any increase or decrease in basic salary.
Formula of CTC
As we know, CTC is the yearly expenditure of the company on an employee. The amount spends on each employee depends on their salary and variable. For calculating the CTC, the salary and additional benefits received by an employee like gratuity, EPF, house allowance, food coupons etc. are added to each other. Therefore in colloquial terms, the cost an employer bears to hire and sustain their employees is the CTC of the company.
Formula: CTC = Gross Salary + Benefits.
In case the employee's salary is Rs. 50,000 and the company pays an additional Rs. 7,000 for their health insurance, then the CTC is Rs. 57,000.
What is Gross Salary
Gross Salary, in literal terms, is the monthly or yearly salary before any deductions are made from it.
OR
The EPF (employee provident fund) and gratuity subtracted from the cost to the company is called the gross salary. These are the components of Gross Salary:
What does CTC include?
These are the components of CTC:
| Direct Benefits |
Indirect Benefits |
Savings Contributions |
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Basic Salary
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Interest Free Loans
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Superannuation benefits
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Dearness Allowance (DA)
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Food Coupons/Subsidized meals
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Employer Provident Fund (EPF)
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Conveyance Allowance
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Company Leased Accommodation
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Gratuity
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House Rent Allowance (HRA)
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Medical and Life insurance premiums paid by employer
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Medical Allowance
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Income Tax Savings
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Leave Travel Allowance (LTA)
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Office Space Rent
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Vehicle Allowance
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Telephone/ Mobile Phone Allowance
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Incentives or bonuses
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Special Allowance/ City Compensatory allowance, etc.
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Here, we have broken down the elements of CTC for you:
Basic Salary: The basic salary will not vary and remains a constant always. The complete amount of your basic salary will be part of your in-hand salary.
Allowances: You will receive a number of allowances, as part of your salary structure, which will help you take care of your basic needs. These include:
- House Rent Allowance (HRA):
- Leave Travel Allowance (LTA):
- Dearness Allowance (DA):
Other such allowances include mobile phone, incentives, medical, vehicle, and special allowances.
