Difference Between CTC and In-Hand Salary
Reviewed by: Fibe Research Team
- Updated on: 27 Jan 2025
- Published on: 3 Sep 2021
Reviewed by: Fibe Research Team
Have you noticed that the CTC discussed while hiring is generally different from what you actually get in hand? Understanding what is the difference between CTC and in-hand salary and gross salary.
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 vs in-hand salary and how they are calculated, read on.
In order to understand CTC and gross salary differences, you must know: What is the difference between CTC and in-hand salary? What is the salary in hand? Also called take-home salary, this is a part of your CTC that you actually get after all the deductions have been made. Understanding how to calculate salary in hand will enable you to manage your finances efficiently.
Here’s an example of how to calculate in-hand salary from CTC:
In-hand salary = Your gross salary – Deductions
Take-home pay is the amount of money deposited in your account by your employer every month after 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. Understanding net salary calculation with formulas can greatly assist in financial planning.
Net Salary = Basic Salary + Allowances – Income Tax/TDS – Employee Provident Fund – Professional Tax
Read the meanings of the terms in the formula below.
What is CTC in salary? If you wish to know the difference between CTC and gross salary, it is essential to understand CTC first. CTC, or cost to a company, is the amount that an employer incurs in order to hire an employee.
Here are the CTC components you need to know with a hypothetical example:
| CTC component | Amount |
|---|---|
| Total CTC | ₹10,00,000 |
| Gross salary | ₹8,50,000 |
| Performance bonus | ₹1,50,000 |
| Deductions | |
| Professional tax | ₹200 |
| Employer PF | ₹1,800 |
| Employee PF | ₹1,800 |
| Employee Insurance | ₹250 |
| Total monthly deductions | ₹4,050 |
| Total annual deductions | ₹48,600 |
| Net take-home monthly | ₹66,783 |
| Net take-home annual | ₹8,01,400 |
Simply put, CTC is the amount the employer or company spends 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 savings schemes you are eligible for are also included in the CTC.
You can calculate your salary from CTC when you do the following:
First, compute your gross salary, which is CTC – Employer’s EPF contribution – Gratuity
Then compute your in-hand salary, which is Gross Salary – Income tax – your PF contribution – Professional tax.
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
(Or)
CTC = Direct benefits + Indirect benefits + Savings contributions
Read the meanings of the terms in the formula below.
To compute your gross salary, you first need to know: How is CTC calculated from in-hand salary? This involves understanding deductions like EPF, gratuity and taxes.
Now that you know what these terms entail, you can quickly determine the conclusion of the CTC vs in-hand salary debate. While CTC is the amount including all deductibles, your in-hand salary means what you actually get after all the deductions have been made. Understanding the components of CTC to in-hand salary helps you plan your finances better.
Simply put, CTC contains numerous deductibles in your overall compensation but is not credited to your account monthly. On the other hand, what is a salary in hand? This is the amount credited to your bank account every month as part of your salary. The company makes the deduction from this sum to contribute towards:
The numerous deductions from your gross income result in a significant CTC and gross salary difference. As a result, it is critical to understand your salary structure and the many terminologies that form an important part of the calculation.
Understanding what is the difference between CTC and in-hand salary enables better salary negotiations and financial planning. Knowing these terms helps you make sound financial decisions about your salary package, tax-saving programs, trip planning and more. You can easily finance goals, from vacations to medical needs, with an Instant Loan or Fibe’s personal loan that you can apply for in minutes on the Fibe App.
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.
If you are still confused about what CTC is in salary, you can consider it as the company’s total cost in order to hire an employee. On the other hand, gross pay is the part of your salary without any deductions.
The CTC includes the following components:
The gross salary consists of the following:
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.
Yes, your employer’s contribution towards the Provident Fund is included in your CTC.
No, LPA and CTC are not the same thing. LPA refers to Lakhs Per Annum and it is a measure that you can use to express your CTC or Cost to Company as your salary package. For instance, if your CTC is ₹1.50 lacs per year, you can mention it as a CTC of ₹ 1.50 LPA.
Yes, any joining bonus that your employer offers you is usually a part of your CTC.
Any salary hike you get is calculated on your basic pay or base salary.
If you are earning ₹18,000 a month as your in-hand salary, you will need to know the bonus, if any and total annual deductions to calculate your CTC.
Your CTC depends on various components such as your allowances, deductions and basic pay. So, if you are earning ₹40,000 a month as your in-hand salary, you can only compute your CTC by adding in these figures.
Your CTC changes based on whether you are getting ₹5 lacs as your annual or monthly salary, as well as all your deductions and allowances. You can calculate your CTC only once you know your salary break-up and other details.
