Do the terms – take-home salary, net salary, gross salary or cost to company (CTC) – confuse you? If Yes, then this article might be helpful for you. Here we will try to explain you the difference between all these terms.
Cost To Company (CTC): The Cost to Company or CTC is the amount that an employer expends in hiring the service of an employee. The CTC includes all the elements of a salary structure – basic salary, House Rent Allowance (HRA), Basic Allowance, Travel Allowance, Medical, Communication, Provident Fund, Pension Fund, and or any incentives or variable pay. The CTC and take home salary of an employee vary as CTC is the sum total of direct benefit, indirect benefit and savings contributions. The direct benefit may include components such as basic salary, conveyance allowance, medical allowance, house rent allowance, communication allowance etc.
Indirect benefits such as food coupons, income tax saving, subsidized meals etc. The savings contributions include – Super Annuation Benefit, Employee Provident Fund, Gratuity etc.
Basic salary: Your basic salary is one of the components of your salary and is mentioned in the salary breakup/structure. The entire amount of your basic salary is included in your take-home salary.
Gross Salary: Subtract gratuity and the employee provident fund (EPF) from Cost to Company (CTC), the amount that you get is your Gross Salary. It is the amount that you get before deduction of income taxes and other deduction such as bonus, overtime pay, holiday pay etc.
Net Salary or Take Home Salary: As the name suggests, take home salary is the amounted that gets credited to your salary account every month. It’s given by the employer after deducting taxes and other deductions such as public provident fund, professional tax subtraction etc.