Reading a Job Offer: CTC vs In-Hand Salary

Many Indian job offers quote a salary as CTC, or cost to company. A fresh graduate might be excited by a CTC of 8 lakh rupees a year, only to find their monthly bank credit is much lower than 8 lakh divided by 12. Why?

What CTC includes

CTC is the total amount the employer spends on you in a year. It usually includes:

• Basic salary, often 40 to 50 percent of CTC.
• Allowances, such as house rent allowance.
• Employer’s provident fund contribution: usually 12 percent of basic, which goes to your EPF account, not your bank.
• Gratuity: set aside for you but paid only if you stay five years or more.
• Variable pay or bonuses, which depend on performance and may not be paid in full.
• Insurance premiums and other benefits.
• Sometimes joining bonuses or retention bonuses, paid once.

From CTC to in-hand

To get your in-hand or take-home salary:

1. Remove employer PF, gratuity, insurance and other non-cash items.
2. Remove variable pay, which is paid later and may vary.
3. Subtract your own PF contribution, usually 12 percent of basic.
4. Subtract professional tax, charged in some states.
5. Subtract income tax deducted at source.

Why it matters

• Two offers with the same CTC can give very different in-hand salaries.
• A large variable component adds uncertainty.
• Money in PF and gratuity is still yours, but it is savings, not spending money.

Comparing offers

• Ask for a salary breakup.
• Compare fixed pay and in-hand salary.
• Consider growth, learning, location and benefits, not just numbers.

The labour codes

India’s new labour codes require that basic pay and certain components make up at least half of total remuneration, which may raise PF contributions and gratuity but reduce take-home pay for some employees.