23 February 2023
Table of contents:
Difference Between CTC and In-Hand Salary
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.
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.
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:
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
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:
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.
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
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.
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.