Every job has a concept called CTC and every professional is aware of that.
Do you know what is CTC actually and what it is meant in your job?
Let's get to know what is CTC in salary and how to calculate it easily.
What is CTC?
CTC is known as the Cost To Company. It is an annual salary package for an employee.
It is usually used to keep a record of the total expenses of a company on an employee in a year. Most companies offer their salaries in the form of CTC. It is not the actual salary of an employee in a year but it also includes the facilities given to him during the course of his service.
The facilities a CTC package include our phone bills, medical bills, petrol, travel allowances, house facilities, meal, etc. Some other companies like large investment banks can also include the office rent area in their CTC package. Furthermore, if your company provides you with a car, driver, house accommodation, etc. The value of all these is also added to your CTC package.
What are the features of CTC?
- Incentives and bonuses
- House rent allowances
- Medical allowances
- Concession on leave
- Vehicle allowance
- Basic Pay
- Dearness allowance
What are the basic components included in CTC?
The CTC package of an employee includes various components such as :
- Basic salary: It is the amount to be paid to the employee before any extras are added or taken off. It is the largest part of the salary structure comprising 40% of the CTC. It is the basis from which other parts of the salary are calculated. Basis salary is taxable therefore it shouldn't comprise more than 40% of CTC. However, it should not be kept too low as well as it will result in cutting down of other components in the salary
- HRA: The employer provides the employee with basic house rent allowances to meet house expenses In the place of work.
- Medical allowances: It is a fixed amount paid to the employee irrespective of the actual charges suffered during medical treatment.
- EPF: 12% is deducted from the salary including the dearness allowances of an employer and added to the employee provident fund. The employer is also expected to match the same percentage which is added to EPF.
What is the expected CTC?
The term expected CTC is what a candidate expects his CTC package is going to include from a particular organization.
What is the difference between CTC and take-home salary?
There is a huge difference between the take-home salary of an employee and his CTC package. CTC is the sum total of direct benefits, indirect benefits, and saving contributions, and as the name suggests take-home salary is the amount that gets credited to your salary account every month. It is given to the employer after the deduction of taxes and other deductions like provident funds, etc.
What are the CTC benefits in India?
There are two types of benefits:
- Direct Benefits: This includes the salary given to the employee every month after the deduction of taxes and other things.
- Indirect benefits: Those benefits which an employee enjoys without paying for it like phone bills, medical bills, travel allowances, etc. These expenses however are added to the employee's CTC as it is an expense for the company.
How is CTC calculated in salary?
- CTC= gross salary + incentives + saving contributions
- Gross salary: This is the net salary that an employee is paid every month which is subjugated to government taxes.
- Incentives: These are the benefits an employee gets without paying for them. These are included in the employee's CTC monetary value as these are expenses for the company
- Saving contributions: Monetary value added to the employee's CTC. For eg EPF
Conclusion
This article tells us everything related to the employees' CTC, including what is CTC, the features of CTC, the components included in CTC, what is meant by the term expected CTC, what is the difference between CTC and takes-home salary, benefits of CTC, and how CTC is calculated in the salary.
Frequently Asked Question(FAQs)
1. What is a CTC in salary?
CTC is the Cost To Company. It is usually used to keep a record of the total expenses of a company on an employee in a year. Most companies offer their salaries in the form of CTC. It is not the actual salary of an employee in a year but it also includes the facilities given to him during the course of his service.
2. What is CTC for 5 lakh?
If your CTC means Cost To Company is Rs 5 Lakh and your company gives you a bonus of Rs 30,000 then your gross salary will be Rs 5,00,000 - Rs 30,000 = Rs 4,70,000.
Your bonus gets deducted from your CTC.
3. What is 2 LPA salary?
2 LPA means 2 Lakhs per Annum, you'll get 2 Lakh in-hand salary per year.
4. Is CTC the same as salary?
CTC (Cost to Company) is not the same as salary. CTC refers to the total cost incurred by a company to employ a person, including the salary and various other components such as bonuses, allowances, provident fund, gratuity, medical benefits, and other perks or benefits provided by the employer.
On the other hand, salary typically refers to the fixed amount of money paid to an employee on a regular basis for their work, excluding any additional components or benefits.
5. Is CTC monthly or yearly?
CTC (Cost to Company) is typically calculated on an annual basis. It represents the total cost that a company incurs in employing an individual for a year, including the employee's salary, as well as other components such as bonuses, allowances, provident fund, gratuity, medical benefits, and other perks or benefits provided by the employer.
