Difference between CTC and Take Home Salary

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Hiral Vakil

CTC
EPF
Form 16
HRA
Salary Income

What is CTC?

CTC stands for Cost to Company, which is actually the cost company bears for an employee. CTC includes the basic salary, all the allowances/ benefits and employer’s contribution to retirement benefits. Allowances and benefits include House Rent Allowance (HRA), Leave Travel Allowance (LTA), Special Allowance, Free Meals, etc. And retirement benefits include Employee Provident Fund (EPF), Gratuity, etc.

CTC = Basic Salary + All Allowances + All the Benefits + Retirement Benefits
Tip
CTC = Basic Salary + All Allowances + All the Benefits + Retirement Benefits

What is Take Home Salary?

The salary that gets credited to your bank account is your Take Home Salary. Take Home Salary is also known as Net Salary. Take Home Salary is computed after deducting taxes & contributions from CTC. As a result, your Take Home Salary will be lower than your CTC.

Example: Vijay is a fresher and the following is the salary structure offered to him.

Components Amount 
Basic Salary 5,00,000
House Rent Allowance 1,00,000
Leave Travel Allowance 15,000
Free meal (Non-Monetary Benefits) 15,000
Conveyance Allowance 19,200
Special Allowance 1,50,000
Employer’s Contribution to EPF (12% of basic salary) 60,000
Employee’s Contribution to EPF (12% of basic salary) 60,000
Bonus 1,00,000
Taxes/TDS 66,785

Following will be the CTC for Vijay:

 

Components Amount
Basic Salary 5,00,000
House Rent Allowance 1,00,000
Leave Travel Allowance 15,000
Free meal (Non-Monetary Benefits) 15,000
Conveyance Allowance 19,200
Special Allowance 1,50,000
Employee’s Contribution to EPF (12% of basic salary) 60,000
Employer’s Contribution to EPF (12% of basic salary) 60,000
Bonus 1,00,000
Taxes/TDS 66,785
CTC  10,85,985

 

Following will be the Take Home Salary of Vijay:

Components Amount 
Basic Salary 5,00,000
House Rent Allowance 1,00,000
Leave Travel Allowance 15,000
Conveyance Allowance 19,200
Special Allowance 1,50,000
Bonus received 80,000
Total Salary 8,64,200
Less: Employee’s Contribution to EPF (12% of basic salary) (60,000)
Less: TDS (66,785)
TAKE HOME SALARY 7,37,415

Conclusion:

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It is important to understand the Salary Structure to do better tax planning.
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How to evaluate the salary offered?

Now that you understand the difference between CTC and take home, you need to look out for following in order to evaluate the salary offered to you:

Income Tax Calculator
Calculate your tax liability. Compare your tax liability as per New vs Old Tax Regime
Income Tax Calculator
Calculate your tax liability. Compare your tax liability as per New vs Old Tax Regime

FAQs

Which salary amount do I have to show in Income Tax Return?

If you have received Form-16 from your employer then you need to show the amount in line number ‘6’ of Form-16 Part B i.e Income taxable under the head ‘Salary’, in your Income Tax Return on IT Portal.
If you have not received Form-16 then you have to add up your basic salary, commission, allowances, net taxable perquisites, bonus and then deduct an exempt portion of allowances, professional tax and entertainment allowance to derive the taxable salary income.

Is CTC same as Gross Salary?

No. CTC is the amount that an employer will spend on an employee in a particular year. Whereas, Gross Salary is the amount an employee receives as a salary. Gross Salary does not include Employer’s contribution to Retirement Benefits.

Does CTC include PF?

Cost to Company (CTC) is the salary package of an employee. It indicates the total amount of expense an employer is spending for an employee in a year. Thus, CTC mostly includes salary, leave travel allowance, bonus, house rent allowance, employer contribution of PF and medical reimbursements.

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