Cost to company
Cost to company (CTC) is a term for the total salary package of an employee, used in countries such as India and South Africa. It indicates the total amount of expenses an employer (organization) spends on an employee during one year. It is calculated by adding salary to the cost of all additional benefits an employee receives during the service period. If an employee's salary is ₹50,000 and the company pays an additional ₹5,000 for their health insurance, the CTC is ₹55,000. Employees may not directly receive the CTC amount.
Difference between CTC and pay slips
The CTC can include many elements in addition to salary/wages, such as health care, pension and allowances for housing, travel and entertainment. Tax is also deducted from the cash amount the employee receives directly. The term CTC is a trick used by companies in India to make employees believe that they are a cost to a company than a asset with which a company generates revenue. A hypothetical breakdown of CTC is given below:
| Component of salary | Amount (₹) | Taxable amount |
|---|---|---|
| Basic salary | 2,40,000 | 2,40,000 |
| House rent allowance | 60,000 | 36,000 |
| Conveyance allowance | 8,000 | 0 |
| Entertainment allowance | 6,000 | 6,000 |
| Overtime allowance | 6,000 | 6,000 |
| Medical reimbursements | 10,000 | 0 |
| Gross salary | 3,30,000 | 2,88,000 |
| Medical insurance | 3,000 | |
| PF (12% of basic salary) | 28,800 | |
| Total benefit | 31,800 | |
| CTC = gross salary + benefit | 3,61,800 |
Break up of take home salary:
| Deductions/take home salary | Amount |
|---|---|
| Tax (10% of taxable amount) | 28,800 |
| Employee provident fund (12% of basic salary) | 28,800 |
| Professional tax | 2,500 |
| Total deduction | 60,100 |
| Gross salary | 3,30,000 |
| Net salary (gross - deduction) | 2,69,900 |
| Monthly take home salary | 22,491 |