Yes, we agree sometimes, it can be very tricky to understand the difference between your in-hand salary and CTC offered.
Although it can be slightly composite to understand all the components of your CTC, and it varies from company to company, we are trying to answer a few commonly asked questions about CTC.
Q1: What is CTC and its Structure?
Ans: CTC in the fundamental terms can be explained as the total expense company will make on an employee for a fixed term; thus, the name “Cost-To-Company” it includes Gross Salary (A), Retrials Benefits (B), and Bonus / Variable (C.)(if any). The Sum of (A+B+C) is your CTC.
|SALARY HEAD (A)||AMOUNT CALCULATION|
|1.BASIC SALARY||@30% – 45% Of fixed CTC (excluding bonus/Variable)|
|2. HOUSE RENT ALLOWANCE.||@40% of Basic Salary|
|3.CONVEYANCE ALLOWANCE.||INR 1600 per month|
|4.SPECIAL ALLOWANCE.||Balance amount after adjustment of allowances and Retrials|
|GROSS SALARY (A)||(1+2+3+4)|
|5.EMPLOYER PF||@12% of Basic or 1800, whichever is minimum|
|6.GRATUITYfirstname.lastname@example.org% of Basic|
|BONUS/ VARIABLE (C.)||As per offer (if any)|
Q2: What is Gross Salary?
Ans: Gross salary (A) is the sum of salary components, Basic salary, and sum of allowances (House Rent Allowance, Conveyance Allowance, and Special Allowance).
Q3: Is my Gross salary the in-hand salary?
Ans: No, there are some possible deduction for Employee part of PF (equal to Employer part), Labour Welfare Fund (2% of Basic or INR 25/- whichever is minimum) and income tax (as per Investment declaration and projected annual income), which needs to be deducted from Gross salary to calculate your Net pay (in hand Salary)
[Gross Salary – Employee PF – LWF – Income tax = Net Pay]
Q4: How do we calculate Income tax?
Ans: Income tax is calculated on projected income for a financial year; therefore, the gross income which you earn during this financial year will be considered for tax calculation. If you are joining in between the financial year, you need to multiply your gross income by the number of balance months in the financial year. If the annual income is more than 5 Lac, the tax will apply to your income.
Q5: Is the Incentive taxable?
Ans: Yes, it is. Tax is calculated on the incentive as per the tax slab applicable to your income.
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