Understanding Gross Salary, CTC, and the Key Differences Explained

I am Venkat. I have just completed my MBA in HR. Could you please explain the gross salary, CTC, and the difference between gross and CTC? I would appreciate it if someone could explain.

Hi Venky,

"Gross" is the sum of basic, HRA, conveyance allowance, medical reimbursement, education allowance, and DA. CTC refers to the cost to the company, which includes gross and statutory deductions like PF, ESI, Bonus, PT.

For example, if an employee's CTC is Rs. 3,20,000/- (which includes gross and statutory deductions), then their take-home salary would be approximately Rs. 24,000/- after deducting statutory deductions.

I hope this information is helpful to you.

Regards,
Sudha

Hi,

"Gross" means the salary booked in the book of accounts under the head of salary. It can be paid on a salary slip or by cheque, and the amount that falls under tax. The part that is paid as allowances by way of putting a voucher against the production of bills will come under CTC. This helps to determine the cost of the employees, which is essential for evaluating costing, ROI, etc. CTC includes all amounts, whether it is an allowance or otherwise. CTC is used by the company itself and not in legal terms.

Regards

Gross salary is the sum total of all earnings that are recorded in your account, and CTC (Cost to Company) includes gross salary + statutory deductions (like EPF/ESIC, both shares including administrative charges) + other privileges offered to you by the company.

Regards,
Sumit Kumar Saxena

Dear Venkat,

Let me explain to you with an example...

Basic: 5000

HRA: 4500

CA: 2500

MA: 3000

Gross: Basic + HRA + CA + MA = 5000 + 4500 + 2500 + 3000 = 15000

CTC: Gross + Employer's contribution of PF + Employer's contribution of ESI (If ESI Applicable) + Gratuity + Superannuation + Any annual salary components like Performance-based variable pay + LTA

Net Salary: Gross - (Employee's contribution of PF + Employee's contribution of ESI + PT)

In this case: 15000 - (600 + 263 + 175) = 13962

Hope this answers your query.

Regards,

Rajat

The calculations can vary from company to company. It would be wise to check with the HR department of the offering company to understand what all is covered under CTC and what your monthly take-home salary would be after deductions. Otherwise, you could be in for a surprise when you accept a job based on the CTC offered, and the monthly net in hand is not what you expected.

For example, in our company, ex-gratia or bonus and gratuity are added to CTC. Some companies that provide bachelor accommodation and conveyance add a notional amount for these facilities to the CTC.

The bonus can be included in the CTC calculation if the bonus is fixed at 8.33%, 10%, or 20%, as the case may be.

Thank you!

Gross salary, gratuity, bonus/ex-gratia, employer's contribution to PF, ESI, if any, mediclaim insurance, and LTA, etc., will come under CTC components.