Cost to Company ( CTC )

What is CTC? 

CTC means Cost to Company. It is a cost that occurs to the company in a year on each employee. CTC is referred to the complete package offered to an employee including additions and deductions such as allowances, fixed or variable incentives, other special allowances and deductions like PF, Insurance etc. Basically, CTC includes all the components of the salary structure in the Indian Payroll System. Employers pay a fixed amount of money to employees known as salary. 

CTC = Gross Salary + (Direct Benefits + Indirect Benefits + Saving Contributions) or deductions

CTC full form, components of ctc

What goes in CTC?

  • Direct benefits: Basis Salary, Medical Allowance, HRA (House Rent Allowance), DA (Dearness Allowance), LTA (Leave and Travel Allowance), Vehicle Allowance, Phone Allowance, Incentives, Bonus, Special Allowance.
  • Indirect benefits: Interest fee loans, Subsidized Meals and Food coupons, Company Leased Accommodation, Life and Medical Insurance Premiums, Income Tax Savings, Office Space Rent.
  • Saving contributions: Superannuation Benefit, EPF (Employee Provident Fund), Gratuity.

Note: Neither do CTC nor Gross Salary is a take-home salary of an employee in India Payroll.

What is Gross Salary?

The whole amount of remuneration paid by the employer firm to the employee as part of the employer-employee relationship is referred to as gross salary.  The CTC, or cost to the employer, would differ from the employee’s take-home pay. The phrases gross salary and net salary are frequently misunderstood by salaried personnel. The gross salary is the total amount of an employee’s CTC, whereas the net salary is the amount that the employee receives as take-home pay. There are no deductions from the gross salary. 

Gross Salary = Basic Salary + HRA + Other Allowances 

Difference between net salary, gross salary and CTC

How to calculate CTC from basic salary:

Let’s consider a salaried professional Mr Pranay with an income of ₹10,48,000 working in Hyderabad. Here is the CTC structure calculation for him:





Basic Salary Basic Salary 5,00,000
Allowances Dearness Allowance 50,000
House Rent Allowance 2,75,000
Conveyance Allowance 20,000
Overtime Allowance 15,000
Medical Reimbursements 25,000
Gross Salary 8,85,000
Benefits vary from

company to company

Medical Insurance 3000

Provident Fund

(12% of Basic)


(12% of 5,00,000)

Electronic Products

(Laptop + Mobile)

Total Benefits 1,63,000

Cost to Company

Cost to Company =

Gross Salary + Benefits




How to calculate HRA (House Rent Allowance)?

Actual HRA received from an employer:

*For those living in metro cities: 50% of (Basic salary + Dearness allowance)

*For those living in non-metro cities: 40% of (Basic salary + Dearness allowance)

Note: Please keep in mind that salary structures differ from one organisation to the next.

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