Do you think you are not getting the pay as promised by your company?
If the answer is yes, then it’s time to break the wall of ambiguity by understanding the difference between Cost to Company (CTC) and Take home salary. First let’s understand what CTC is:
CTC or Cost to Company is every single penny that a company would incur on you as an employee. This includes Basic pay and all monetary and nonmonetary benefits.
Then what is Take home Salary?
Take home salary is the amount which you receive at the month’s end from your company or in other words the money that gets into your pocket every month. It’s arrived after deducting all the tax liabilities and other contributions like contribution to PF etc.
Suppose Ram, a software engineer, is a appointed in a company with a package of Rs. 6,73,200 per annum. Let’s analyze the difference between the two with his example:
Take Home Salary
Employer contribution to PF( 12%of basic pay)
Employee contribution to PF ( 12% of basic salary)
Income tax liability (TDS)
It can be observed that there is a difference of Rs. 16,200 between CTC and Take Home Salary per month. The Company offered him a package of Rs. 6, 73,200 p.a. but he only got Rs. 4, 78,800 in hand.
The question which arises here is “where the difference amount of Rs. 16,200 gone?”
From the above example, it’s apparent that CTC includes all the direct and indirect benefits. On the other hand, Take Home Salary is what Ram is getting after deducting his contribution to P.F. and TDS.
Take Home Salary=CTC-Car Facility-Telephone Reimbursement-Free meals-Employer’s contribution to P.F.-Employee’s contribution to P.F.-Income Tax
But there is no need to get disheartened. No matter if you aren’t getting the deducted amount today, you will definitely reap the future benefit out of the salary given up today.
What you should do is you can start planning how to increase your take home salary by proper tax planning and negotiations with your employer so as to convert indirect benefits like free meals, car facility etc. into direct benefits by way of allowances.