Difference between CTC and Take Home Salary

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By Hiral Vakil on March 7, 2019

This is one of the most common questions amongst the salaried individuals. Mind you, this is also an important bit when you are accepting your first job offer or even when you are considering a change in job for better financial prospects.

What is CTC?

CTC stands for Cost to Company, which is actually the cost company bares on an employee. CTC includes the basic salary as well as all the monetary and nonmonetary benefits offered to employees like House Rent Allowance (HRA), free meals, subsidised loans, medical reimbursement etc.

What is Take Home Salary?

Salary that gets credited to your bank account is your actual take home salary. You may find that your take home salary is not the figure resembling your CTC. That’s because your take home salary is computed after after deducting taxes & contributions from CTC. As a result, your take home salary will be lower than your CTC.

How to calculate CTC?

ComponentsAmount (Rs.)
Basic Salary5,00,000
House Rent Allowance1,00,000
Medical Reimbursement15,000
Free meal15,000
Conveyance Allowance19.200
Special Allowance1,50,000
Medical insurance7,800
PF (12% of basic salary)60,000
Bonus (determined based on performance appraisal & ranges between 75,000 to 1,00,000)1,00,000
TOTAL CTC9,67,000

How to calculate Take Home Salary?

ComponentsAmount (Rs.)
Basic Salary5,00,000
House Rent Allowance1,00,000
Conveyance Allowance19,200
Special Allowance1,50,000
Bonus received80,000
Total Salary8,49,200
Less: PF (12% of basic salary)(60,000)
Less: Tax payable (Calculated at slab rate, assuming total deductions of Rs. 1,50,000)(66,785)
TAKE HOME SALARY7,22,415
  • As you can see that the major differentiator between the CTC and the take home salary is the nonmonetary benefits.
  • So, for eg., the free meals worth Rs. 15,000 as per your CTC will not be paid to to you but you may be given coupons which you can redeem for availing the benefit of free meal. As a result, it will not form part of your take home salary.
  • The PF will be deducted since it’s a forced investment and is not actually paid out to you.
  • At last after deduction of the income tax & professional tax, you’d get your take home salary.

How to evaluate salary offered?

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

  • Keep in mind that your basic salary is critical since most of your allowances will be based on that.
  • Keep an eye for special allowance and check out whether they are based on performance or targets.
  • Don’t just focus on the take home salary. check out other benefits which a company provides like medical and health insurance, free meal, transportation, better career prospects, which in turn might not be so bad if you match them with a higher take home salary being offered by other companies.

Frequently Asked Questions

1. 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 you Income Tax Return.

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 exempt portion of allowances, professional tax and entertainment allowance to derive the taxable salary income.