What Is The Difference Between CTC and In-Hand Salary: A Guide

Job hunting can sound intimidating. Is that because of terms like CTC and in-hand salary? Are you new to these terms? No issue; we are here to help you understand the difference between CTC and in-hand salary. 

Cost to Company (CTC) refers to the total cost incurred by an employer for hiring an employee. The CTC figures provide a comprehensive view of the employer's investment in an employee.  

The components of CTC are categorised into three categories: 

Direct benefits are the total monetary benefits that the employee receives annually. This includes basic salary and allowances such as leave allowance, medical allowance, vehicle allowance, etc. 

Indirect benefits are the total amount paid by an employee on behalf of the employer, such as subsidised meals, company-leased accommodation, life insurance, etc.  

The saving schemes include the employer's contribution towards the schemes to which an employee is entitled. One of the schemes is the Employees’ Provident Fund (EPF) and superannuation benefits.  

Gross salary refers to an employee's pay before making any mandatory deductions. These amounts include the basic salary, bonus amount, and allowances before the tax deduction, which is generally stated in the contract.  

In-hand salary is the amount that an employee takes home. It is also known as the net salary or take-home pay. The in-hand salary can be calculated by deducting the liable tax amount from the gross salary.  

For example, gross earnings are Rs 1,400, and total deductions are Rs 220. Therefore, the net pay is Rs 1,180. The annual pay figures will be Rs 1,180 multiplied by 12, making it Rs 14,160. Hence, in-hand pay is Rs 14,160.  

Combine allowances and special allowances with your basic salary. Subtract professional tax, standard deduction, and HRA exemptions from the gross salary. Add commissions, bonuses, or extra income. Subtract deductions under sections 80C, 80D, and Chapter VIA. Apply the income tax rate based on the taxable income