Understanding your CTC and your Take Home Salary

As an employee, your job may entitle you to both monetary & non monetary benefits. The sum all of these benefits is usually referred to as CTC. An employer includes all the cost it takes to employee you the sum of these costs is commonly known as CTC.

Broadly your CTC will include these

  • Salary received each month
  • Retirement benefits or PF/Gratuity which are received when you leave your job or at the time of retirement
  • a portion of your CTC may include benefits given to you but not directly paid as money. For example – an office cab service, medical insurance paid for by the company, or free meals at the office, a phone provided to you and bills reimbursed by your company.


Now let’s take a look at components of CTC in detail

1. Amounts paid with your salary –

  • Basic Salary
  • Fixed Allowances – HRA, Leave Travel Allowance, Dearness Allowance or DA, Conveyance allowance.
  • Variable or fixed performance bonus – Any bonus that you are likely to receive based on your performance or a fixed payout, forms part of your taxable salary.

2. Retirement Benefits –

  • Provident Fund – Employer’s contribution of 12% of your salary is usually included as part of your CTC.
  • Gratuity
  • Superannuation

3. Reimbursements –

  • Mobile bill reimbursements
  • Medical bills reimbursements
  • Meals reimbursements

4. Other Benefits & Perks –

  • Medical Insurance paid by company to insurance the health of you or your family
  • Credit cards provided to you
  • Cab facility provided to employees

As you can see an employer usually includes all it takes to employee you as your CTC. However, your take home salary or salary after deducting tax – may work out to be a different amount.

Let’s understand this by way of an example, on the left is the CTC that Sudha received in her appointment letter which has her salary & benefits detail. Her CTC includes medical reimbursements of Rs 15,000 against bills and medical insurance for her family.

On the right is the amount that she will actually receive in her bank account as salary. Her medical reimbursements and the amount her company pays towards Employer PF contribution as well as towards insurance does not form part of her taxable or take home salary.

understanding CTC

tax payable

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