Calculating Gross and CTC from Cash in Hand Salary: Can Anyone Help?

Can anyone guide if we have cash in hand salary, then how can we calculate the gross and Cost to the company (CTC inclusive of TDS).

Regards,
Arti Chopra

In my opinion, "salary slips" - generally a half A4-sized paper printed by a computer - shall give you all the details of salary, including Gross and Net salary. The Payment of Wages Act stipulates that every employee (specifically in non-managerial positions) be given an account of all payables and deductions along with their salary - thus making salary slips mandatory. By adding certain tangible monetary benefits extended by the company to the gross pay and multiplying it by 12 shall give you the CTC per annum. I presume you are not working as an HR in any company because generally HR professionals are supposed to know such basic things; otherwise, they would be weeded out during the interview itself. Warm regards.

Sir, my question is if we hire an employee on net salary, where other deductions like TDS, PF by the employee & employer side are borne by the employer, how can we calculate the employee's CTC?

Hi Arti,

Cost to company includes each of the salary components like BASIC, DA, HR allowances, PF, ESIC, bonus, everything which the company gives to employees or incurs expenses on them.

Siddharth

Dear Arti,

What you have cited is not a standard industry practice, and that's the reason you find yourself in confusion/trouble.

Hope you understand the following terms:

CTC (which includes almost everything the company spends on the employee, including the PF and ESI contributions made by the employer on behalf of the employee - also expenses on 'notional' gratuity are added);

Gross Salary (which includes everything paid to the employee in cash plus the deductions that have been made from the employee's salary, such as the employee's share of PF, ESI, or the recovery of any loans/advances);

Net Salary (which is the actual amount received by the employee after all deductions, including Income Tax (TDS), which goes into the employee's hands/bank account).

Hope the above three terms are clear to you. If you know the Net Salary, you can calculate the other amounts that are either paid by the employer on behalf of the employee or deducted from the employee's salary.

When you add the deductions from the salary to the Net Salary, you arrive at the Gross Salary.

To the Gross Salary, when you add the amount paid/spent by the employer (which are not paid/payable to the employee presently), you arrive at the CTC.

Another point to note is: An employer cannot pay TDS for the employee; it has to be deducted from the salary. Any TDS paid by the employer is added to the employee's salary; this is the view adopted by the Income Tax authorities. Therefore, this illegal/unethical practice needs to be discontinued.

Hope the above clarifies the issue.

Warm regards.