Difference Between CTC and In-Hand Salary


23 February 2023

Difference Between CTC and In-Hand Salary

Table of contents:

Difference Between CTC and In-Hand Salary

  • What is in-hand salary?
  • What is gross salary?
  • How is net salary calculated?
  • What is CTC?
  • How is CTC calculated?
  • What is the difference between CTC and in-hand salary? 
  • FAQs

CTC and in-hand salary are some of most common terms you hear as a working professional in India. Did you know that there is a big difference between CTC and in-hand salary? Your in-hand salary is actually a part of the CTC. 

It is crucial to understand the differences between these terms since knowing how they work helps you approach salary negotiations in a more informed manner. For a brief overview of the CTC and in-hand salary differences and how they are calculated, read on.

What is in-hand salary?

Before understanding the difference between CTC and in-hand salary, you need to know what in-hand salary means. Simply put, in-hand salary is the net monthly salary you take home. 

In-hand salary = Your gross salary – Deductions

Also called take-home pay, this is the amount of money deposited in your account every month post all deductions.

What is gross salary?

Gross salary is the amount you receive from your employer before any deductions are made. 

Your gross salary includes the following components without any tax deductions:

  • Basic pay
  • Bonus
  • Allowances

How is net salary calculated?

This amount is calculated by combining your basic pay and allowances. Various types of taxes (income tax, EPF, professional tax) are then subtracted from the sum. 

Net Salary = Basic Salary + Allowances – Income Tax/TDS – Employee Provident Fund – Professional Tax

  • Basic salary: Also referred to as in-hand salary, it is a fixed component of your total compensation that always stays the same.
  • Allowances: You may get several allowances like home rent allowance (HRA), leave travel allowance (LTA), dearness allowance, children’s education allowance, etc.
  • Income tax/TDS: Your employer deducts the tax applicable to your salary (based on the slab) before crediting your salary. This tax is also called tax deducted at source (TDS). 
  • Employers’ Provident Fund: Here, the employer’s contribution is 12% of your monthly salary, which is credited to the EPF account. The current interest rate on EPF accounts is fixed at 8.10% valid until March 2023. 

What is CTC?

The CTC or Cost to Company is your total salary package as an employee. It indicates how much an employer spends on an employee over a year. Knowing what CTC means is crucial as this helps you easily understand the difference between CTC and in-hand salary. 

Here are the CTC components you need to know:

  • Basic salary
  • Allowances
  • Provident fund
  • Additional benefits from your employer

Simply put, CTC is the amount spent by the employer or company after recruiting you and utilising your services. Remember, CTC is a variable pay, which includes several direct and indirect benefits from the employer. 

While direct benefits include your take-home salary per government taxes, the amount paid by the employer on your behalf constitutes the indirect benefits. Apart from these, the saving schemes you are eligible for are also included in the CTC. 

How is CTC calculated?

CTC is computed by adding the total cost of any supplementary benefits received by the employee during the service year to the employee’s salary. 

CTC = Gross salary + PF + Gratuity 


CTC = Direct benefits + Indirect benefits + Savings contributions

  • Gross salary: As discussed above, this refers to your entire pay before deductions. 
  • Provident Fund (PF) is a government-managed retirement savings program for employees. Both employees and employers are required to deposit 12% of the basic salary into the PF account.
  • Gratuity: Gratuity is the total sum of the amount paid by the employer to an employee at the time of retirement. 

What is the difference between CTC and in-hand salary? 

While the CTC constitutes your total salary package, your in-hand salary includes the total amount you get once all deductions are complete. 

Simply put, CTC contains numerous deductibles included in your overall compensation but is not credited to your account every month. In contrast, take-home pay is the amount that is eventually deposited in your bank account after all mandatory deductions such as PT, PF and TDS. 

The numerous deductions from your gross income result in a significant difference between the original CTC and the actual in-hand compensation. As a result, it is critical to understand your salary structure and the many terminologies that are used in the calculation. 

Knowing these terms help you make sound financial decisions about your salary package, tax-saving programs, trip planning and more. You can easily finance such goals, from vacations to medical needs, with an Instant Loan that you can apply for in minutes on the Fibe App. 

FAQs about CTC and in-hand salary

Is the in-hand salary the same as CTC?

No, in-hand salary and CTC are different. While in-hand salary is the money deposited in your account every month after all deductions, CTC constitutes your total salary package.

How is CTC calculated from in-hand salary?

In-hand salary is a part of your total CTC. Simply put, in-hand salary = CTC – Sum of the following components such as PF contributions made by you and your employer, food coupons and total tax liability.

What is the difference between CTC and in-hand salary?

CTC is the total amount spent by an employer on you for utilising your services, while in-hand salary is the amount you receive every month after deductions.

What is CTC and gross pay?

While gross pay is the total amount paid by your employer before making any deductions, CTC refers to entire salary package.

Which is better: CTC or gross salary?

While CTC includes salary contributions, reimbursements and tax benefits, gross salary consists of your basic pay, house rent allowance, travel allowance and dearness allowance. Subtracting the gratuity and EPF contributions from CTC can help you determine the gross salary. CTC is considered better than gross salary because of its umpteen benefits.

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