Last Updated on Dec 1, 2022 by Anjali Chourasiya

CTC (Cost to Company) and in-hand salary are two widespread terms in the Indian job landscape. However, many people consider both to be the same, failing to realise that CTC and in-hand salary are different. In reality, your in-hand salary is part of the CTC or the salary package that also includes various other deductions. Therefore, the salary you receive at the month-end significantly differs from what the company offers you during the hiring process.

Understanding your salary structure is pertinent to figuring out your in-hand salary and why it differs from the initial CTC. 

So, let’s get a clear picture of the CTC and the salary you take home.

What is CTC?

CTC is the total salary package of an employee. It refers to the total amount of money an employer spends to hire a new employee. Besides the basic salary, the CTC typically includes several components such as HRA, health insurance, travel allowance, provident fund, etc. In other words, CTC is the spending a company incurs on recruiting an employee and sustaining their services. Therefore, CTC is a variable pay since it considers various elements, including direct and indirect benefits.

Components of CTC

CTC has various elements. They can be categorised as direct benefits, indirect benefits, and saving contributions.

  • Direct benefits: Sum paid to an employee on a yearly basis, i.e. take-home salary, subject to government taxes.
  • Indirect benefits: Amount, the employer, pays on behalf of the employee.
  • Saving contributions: Saving schemes the employee is entitled to.

Let’s have a look at all of them:

Direct benefitsIndirect benefitsSaving Contribution
Basic salarySubsidised meals/food couponsEmployees’ Provident Fund (EPF) 
Dearness Allowance (DA)Income tax savingsSuperannuation benefits
House Rent Allowance (HRA)Company leased accommodationGratuity
Medical AllowanceInterest-free loans
Vehicle AllowanceOffice space rent
Leave Travel Allowance (LTA)Life insurance and medical premiums
Telephone/Mobile phone allowance
City Compensatory Allowance (CCA)

Cost to Company (CTC) = Direct benefits + Indirect benefits + Savings contributions

  • Basic salary – It is the non-variable component of the salary and is an integral part of the in-hand salary.
  • DA – It is paid to government employees, pensioners, and private sector employees to curb the effects of inflation.
  • HRA – The employer provides HRA towards the rent payment of the employee who rents their place of residence.
  • LTA – When an employee travels for company purposes, the company pays their travel expenses, excluding food and accommodation expenses.
  • Vehicle allowance – Employees are eligible for reimbursement of fuel or vehicle charges when used for official purposes.
  • Telephone/Mobile phone allowance – It is the reimbursement of the internet and telephone bills of an employee. This allowance usually has a predetermined limit.
  • CCA – It is the cost provided by the employer to compensate for the higher cost of living in Tier-1 or metropolitan cities. In some cases, CCA is offered for employees working in Tier-2 cities as well.
  • EPF It offers retirement benefits. Employees and employers each contribute 12% of the basic salary of employees every month towards the fund. The employer’s contribution is calculated within the CTC for the employee.
  • Superannuation – It is a type of fund that an employee receives as a retirement/pension benefit.
  • Gratuity – It is the amount paid by the employer in return for the services offered by the employee to the company. Gratuity is usually provided after more than 3 or 5 yrs of service.

What is the gross salary?

An employee receives a gross salary from the company before making any mandatory or voluntary deductions. Therefore, gross salary includes basic pay, bonuses, and various allowances and is the amount before deducting any tax.

Gross Salary = Basic Pay + HRA + Other allowances/benefits

What is the in-hand salary?

In simple words, in-hand or net salary is the salary that an employee takes home. Also known as take-home pay, it is the amount an employee receives after taxes and other deductions. Therefore, the net salary differs from the gross salary because gross income doesn’t include tax deductions. On the contrary, the net income is the compensation after subtracting TDS, professional tax, and other company policy deductions.

Net Salary = Gross Salary – Deductions

Difference between CTC and in-hand salary

The above discussion makes the difference between CTC and in-hand salary pretty evident. 

While CTC is the total salary package of an employee, the in-hand salary is what’s left after all kinds of deductions. Thus, CTC reflects the total expenditure that an employer spends on an employee during a financial year. On the other hand, the in-hand salary is the amount the employee eventually gets after TDS and other deductions. 

Another important terminology is the gross salary; it is the basic pay plus other allowances, bonuses, and benefits. You’ll learn how to calculate the in-hand salary from the gross salary in the following section.

How to calculate in-hand salary from gross salary?

Here is an example to demonstrate how you can calculate the in-hand salary from the gross salary:

Say you work at a technology firm where your gross salary p.a. is Rs. 70,000, but your in-hand salary is Rs. 56,000. Here’s a breakdown of your salary components and deductions:

Salary Components:
Basic SalaryRs. 25,000
HRARs. 20,000
Travel AllowanceRs. 15,000
LTARs. 10,000
Gross SalaryRs. 70,000
Provident FundRs. 3,000
Profession TaxRs. 500
Income TaxRs. 1,500
Loan DeductionRs. 9,000
Total DeductionsRs. 14,000
Net Salary (Gross Salary – Deductions)Rs. 56,000

Various online tax calculators are available that can do the calculations without you having to rack your brains with numbers!

Calculation of your taxable income

To arrive at your taxable income, you have to subtract the eligible deductions from your gross salary. Here are the steps to do the same:

Step 1: Calculate your gross salary by adding HRA, DA, travel allowance, and special allowance to your basic pay.

Step 2: Next, deduct the professional tax, HRA exemptions, and standard deductions from the gross salary.

Step 3: Add any commission/bonus, extra income from interest, etc., to the arrived amount.

Step 4: Then, subtract various deductions as given under Sections 80C, 80D, and Chapter VIA of the Income Tax Act.

Step 5: The amount you arrive at is your taxable income. Now, the income tax slab and rate applicable to you depend on this final income.

You can take the help of online tax calculators to arrive quickly at your accurate taxable income.


If you’re awaiting your first salary, it’s important to know that the CTC is not the pay you take home. While the CTC is usually lucrative enough to put an employee on cloud nine, the in-hand salary sometimes tends to pop the bubble. But understanding that the CTC is the complete package and liable for deductions will save you any undue disappointment! So understand in detail the difference between CTC and in-hand salary and reach out to your company in case of discrepancies. 


What is dearness allowance?

The cost of living adjustment allowance that the government pays to the employees of the public sector and pensioners is known as Dearness Allowance (DA). It is reviewed bi-annually and calculated as a percentage of the basic salary to curb the effects of inflation.

What is the HRA in salary?

House Rent Allowance (HRA) is a part of the salary provided by the employer towards the rent payment of the employee. It is allowed as a deduction from taxable income under Section 10(13A).

What is the CTC salary?

Cost to Company (CTC) is the total cost of an employee to the company, including basic pay, reimbursements, various allowances, gratuity, annual bonus, etc. It refers to the total salary package of an employee. 

Anjali Chourasiya
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