How Cost to Company Calculated in a Salary ?

Cost to Company

Cost to Company, popularly known as CTC. It means how much money a company will spend on you each year as pay. Figuring out your actual salary from your CTC can be tricky. FYI it has many parts, which you are unaware about.

This article will help you understand what CTC means. How its fractioned in different parts. Article will clear a lot of doubts too. Like we all get confused with CTC being a in hand salary. So, stay tuned with us till the end. Trusts me! if you are a new comer, then this page is for you.

What is CTC?

Cost to Company is the total amount of money a company spends on an employee each year. This includes everything the employee receives monthly. Like salary and allowances. Moreover, yearly benefits like bonuses and gratuity. In total, it’s how much the company pays for each person they hire.

How CTC Calculated in a Salary?

CTC is how much an employee gets in a year. It includes everything they’re given besides their salary. It’s different for each hired person. Based on their pay, bonuses, and extras. To figure it out, you add up the salary and all the extra elements. Like retirement funds, bonuses, allowances, insurance, and travel money. CTC is the total cost to the employer for having that employee.

Elements Of CTC

The CTC is made up of different elements:

  • Basic Salary: This is the main pay you get from your employer. It doesn’t include bonuses. When you get a raise, it usually applies to your basic salary.
  • House Rent Allowance : This helps you pay for your rent. If you rent a place, this part of your salary might not be taxed. But if you don’t rent, it could be taxed.
  • Phone and Internet Allowance: It covers the cost of your phone and internet for work. More companies are including this. Many people work from home now.
  • Bonuses: Your CTC might include extra money. Like performance bonuses or yearly bonuses. This depends on your employer’s policy.
  • Special Allowances: This is extra money that doesn’t fit into any other category. If your CTC is, for example, ₹10 lakhs. Everything else adds up to ₹8 lakhs. The rest ₹2 lakhs might go into a special allowance.

Indirect Elements of CTC

Your total CTC might include additional benefits. That don’t directly affect your take-home pay. These extras could potentially increase your overall compensation. But won’t necessarily impact the money you receive in hand. For instance, if your employer offers you a loan. It might be counted in your CTC. However, not all employers provide loans. So, you might need to seek a personal loan elsewhere.

  • Net salary
  • Leave Travel Allowance
  • Vehicle Allowance
  • Conveyance Allowance
  • Medical Allowance

Benefits included in CTC

Your CTC isn’t just your monthly salary. It also includes extra perks. Like insurance, savings, housing, and travel allowances. So, besides what you earn each month. You get these additional benefits too.

  • Direct Benefits: net wages, reimbursement & other compensations  
  • Indirect Benefits: insurance coverage, medical cover & more.
  • Savings and Contributions : EPF, Gratuity & more.

Difference Between Gross Salary & CTC

Gross salary and CTC might seem alike. But there’s a huge difference between both. CTC is what a company spends on hiring and keeping employees. Whereas, gross salary is what you get before any deductions from your employer.

Take away things like PPF deductions, insurance premiums, and gratuity from CTC, and you get gross salary. Then, if you subtract taxes and other necessary deductions, you end up with the net salary you take home.

CTC covers direct, indirect, and savings benefits. While gross salary is what you earn before taxes and deductions. It’s crucial to understand what makes up your salary. Plus, consider finding a secure place to save your money to prevent it from losing value due to inflation.

Knowing your CTC and its parts is important. It will help understanding your compensation and budgeting. It helps you see where your money goes. By this, you make smarter financial choices. So, take some time to understand your CTC. And use it to make better decisions about your finances.

This was all from our side. We hope this article was help for you to understand CTC. Stay connected, stay updated with us.


Q1. How to calculate my CTC?

A- To calculate your CTC, you have to add your gross salary and  benefits. For example, your salary is 35000 and your company pays an extra 5000 for health insurance. This makes your CTC 40000.

Q2. Are everyone’s CTC benefits same  ?

A- No, it depends on employer’s rules, like what additional benefits he/she is giving.

Q3. What is full form of CTC?

A- Cost To Company.

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