Understanding Salary Terms: Can You Explain Gross, Net, and CTC?

Hi Seniors,

Can you please explain the terms, what actually they mean:

1. Gross Salary
2. Net Salary
3. CTC

Regards,
Narinder

Understanding Salary Components

Payment = Gross Pay
Gross Pay - Deductions = Net Pay (Cash in Hand or Take Home)
Gross Pay (inclusive of all) + All employer contributions = CTC (Cost to Company, which is the total amount your employer will spend on you, other than CTC).

Example (Monthly):
- 15,000 Gross Pay
- 200 PF
- 200 ESI
- 200 PT
= 14,400/- Net Pay

Now, 15,000 + employer PF contribution + employee ESI contribution = CTC

Gross salary is the total of all the payables due to you each month. This would include basic salary, HRA, Conveyance, Medical, and other allowances. If there are incentives or bonuses, they would also form part of the gross salary.

Net salary is the salary you would take home after all deductions. Such deductions would include PF, ESI, TDS, unpaid leave, loans and advances, and any other applicable deductions.

So, Net salary = gross salary - applicable deductions.

Hope this helps.

Regards,
Gaurang

Gross Pay is the total earnings shown on the left side of the pay slip. Net Pay is Gross Pay minus all statutory and other deductions shown on the right side of the pay slip. CTC includes all direct pay (Gross Pay & Other Direct Pay, e.g., Bonus) and indirect pay (Employer Contribution to PF, ESI, superannuation, medical insurance, etc.).

Regards,
Prahalatha Rao

Understanding CTC and Employer Expenses

CTC means Basic + HRA or DA + Conveyance Allowance + Leave Travelling Allowance + Medical Allowance + Special Allowance + Newspaper Allowance or allowances which are given to employees.

Other expenses which are borne by the employer include Gratuity + Leave Amount + ESI & PF Contributions + Electricity & Water & Transport Charges, among other expenses related to the employees.

Understanding Salary Components

The Gross Salary will mean your Basic pay + Dearness Allowances and all other allowances such as HRA, Children education, Conveyance, etc.

The Net salary will mean your take-home pay. Gross Salary - Statutory deductions such as PF, ESI, Profession tax, Income tax deductions, etc. & Non-Statutory deductions such as Canteen subsidy, transport subsidy, etc.

The CTC, on the other hand, includes the following:

Gross Salary + Annual Bonus/Allowances such as Incentives, Statutory Bonus, Medical Insurance premium paid by the Employer, Superannuation amount paid by the employer, Canteen facility (expenses incurred per head for maintaining the canteen), cost of beverages such as tea and coffee for individuals, LTA, Medical reimbursements, Welfare such as Uniforms, Snacks provided, Leave facilities (EL + other non-statutory leave provided). In short, it will include the expenses that an employer incurred for a particular employee for employing that particular individual.

Trust the matter is clarified.

Regards,
M.V. KANNAN