How to calculate your CTC and take home salary?

By the way, what is your CTC? A common question is usually asked in front of parents, wife, or girlfriend. Everyone wants to know how much income you bring home or what is your earning capacity?  But do you know what is CTC’s full form in salary? Well, it means Cost to Company. Your salary package inclusive of everything becomes a cost to the company for any company that hires you. Nothing in this world is free, the same goes with your services. Your services come with a price tag attached to them that the company needs to pay, which is termed Cost to Company (CTC). Basically, CTC is like that cake which may seem very delicious but you end up getting just a piece of it (take-home salary) at the end of every month.

What is CTC’s full form in salary?

Finally, you get your offer letter from the company and you search the word CTC to know your salary package.  CTC as the word suggests means Cost to Company. The Total Cost to the company for hiring you, after taking into account all the expenses incurred, like salary, PF, welfare, medical, bonus, etc all added together is the cost that company needs to bear to hire and retain you on yearly basis. This cost is calculated taking all monetary and non-monetary expenses into consideration. It is an amount usually mentioned for the whole year. Projected benefits are all factored in while calculating the salary package on yearly basis  =for an employee based upon the grade he is hired at.

CTC = Base Salary + Allowances + Other benefits like PF/Insurance/Gratuity

CTC (full form in salary Cost to company) does not factor in any income tax or other tax deductions. It is the raw salary presented by the employer to the employee while at the end of every month the employee receives processed salary after factoring in all the deductions and excluding any indirect benefits.

Next time when someone asks you your CTC or if you want to know someone else’ make sure to deduct at least 30% to 35% of the CTC amount to know its actual take-home salary.


Difference between CTC and take-home salary?

You receive an offer letter from your company and wow, you are on cloud 9. You accept the offer letter going by the CTC mentioned in the offer letter and you join the company. Now you are patiently waiting for the month to end so that your salary gets credited into your bank account. But wait, “Beep” comes a message on your mobile, Rs xx, xxx gets credited into your account. You see the message and you are in shock. You expected per month salary to be way higher based on the CTC mentioned in your offer letter but what you see differs from what you have thought. What went wrong? You are puzzled, and the best way to clear your doubt is t contact the company’s HR. You go straight to HR to show your message and compare it with the CTC mentioned in the offer letter. Your HR then explains to you that the Cost to the company is different from the take-home salary. CTC is the total cost that company has to bear as long as you are an employee of the company. Whereas your take-home salary will include only base salary along with allowances without indirect benefits and after deduction of income tax applicable as per the tax slab as well as a professional tax deduction.

Below are the differences between the CTC and take-home salary:

Parameters CTC Take-home salary
Meaning The total cost that company bears to retain and hire an employee It is the actual salary that the employee takes home every month
Provident Fund (PF) PF is included PF is excluded
Gratuity Gratuity is included Gratuity is excluded
Income Tax Income tax is not deducted Income tax is deducted
Professional Tax Not deducted It is deducted from salary
Non-monetary pay Included Not included in take-home salary
Subset  It is the total cost to the company Take-home salary is a subset of CTC

Want to know your CTC?

CTC (full form in salary Cost to company) could be tricky especially when you have switched a company or offered a promotion. CTC mentioned in the offer letter becomes the full and final price tag to hire you and retain you. You need to negotiate on the final CTC so better know the take-home salary which may be camouflaged by CTC. In an actual sense, the take-home salary is at least 30% to 35% lesser than CTC mentioned in the offer letter. It is advisable to use the below tool to calculate the estimated take-home salary before you accept any offer letter by just looking at CTC offered.

Calculate Cost to Company when:

If your company has given a break-up and told you your take-home salary per month or per year then calculating the cost to the company becomes easier as below. In the sheet just input the red highlighted figure

  1. Take-home salary per year is known to you

Calculate CTC per year

  1. Take-home salary per month is known to you

Calculate CTC per year

Calculate Take home salary

Take-home salary = CTC – (30% of CTC)

The assumption is a flat 30% reduction from the original CTC offered. Better negotiate hard to increase your CTC and take a hike on the last drawn CTC and not the last drawn base salary. Be careful and bargain for your worth. If possible do take a breakup of your salary as to what is fixed and what is variable. Transparency is the key here.

Calculating take-home from CTC is pretty easy just click below, input your CTC mentioned in the offer letter, and that’s it sits and relaxes. Your take-home salary per month, as well as take-home salary per year, will get populated.

Calculate Take Home Salary

What forms CTC?

CTC is the Cost to the company including all the costs incurred in retaining an employee is included in the employee’s salary package.

  • Base Salary – It is the basic salary of the employee based upon the kind of role, experience, and pay rate based on an industrial scale.
  • Allowances – HRA, DA, transport, and other allowances form part of an employee’s salary. These may vary from company to company.
  • Leaves – Any sick leaves, paid leaves, casual leaves for which there will be no loss of pay or deductions from the employee’s salary.
  • Provident Fund – It is payable by the employer as well as the employee at a fixed rate. The employee’s contribution is included.
  • Gratuity – If an employee stays in a company for at least 5 years, then the employee is liable to get gratuity which is more of a loyalty amount.
  • Bonus – When a company performs well, achieves its target, then employees are liable to get bonus pay.
  • Non-monetary pay – Meal coupons, transport facilities, internet facilities are all included.

Please note any kind of deductions like Income tax or professional tax deductions are not factored into CTC. Thus, whatever is the total amount, it is exclusive of any deductions. Thus, what you see as Cost to the company is an inflated amount that is yet to factor in internal and external costs.


Estimated salaries of some professionals:

  1. Sommelier Salary:
    • Sommelier salaries can range from $40,000 to $80,000 or more per year in the United States. Higher-end establishments and experienced sommeliers may earn salaries at the higher end of this range.
  2. Behavioral Therapist Salary:
    • Behavioral therapist salaries can vary based on factors such as education, experience, and location. In the United States, behavioral therapists may earn anywhere from $40,000 to $70,000 or more per year, but this can vary.
  3. Illinois State Salary:
    • The average salary in Illinois varies across professions. According to the U.S. Bureau of Labor Statistics (BLS), as of 2020, the annual mean wage for all occupations in Illinois was around $59,860.
  4. Automation Engineer Salary:
    • Automation engineer salaries can vary based on factors such as experience, industry, and location. In the United States, an automation engineer may earn anywhere from $70,000 to $120,000 or more per year.
  5. Interventional Cardiology Salary:
    • Interventional cardiologists, being specialized medical professionals, often earn higher salaries. Salaries for interventional cardiologists can range from $300,000 to $600,000 or more annually, depending on factors such as location, experience, and the type of healthcare facility.

These figures are general estimates, and the most accurate and up-to-date information can be obtained from sources such as salary surveys, industry reports, or job market analyses specific to the current year and region.

“Cost to company” (CTC) is a term commonly used in the context of employment and refers to the total amount of money that a company is willing to spend on an employee in a given year. However, the actual take-home pay of an employee is usually less than the CTC. There are several reasons for this, and I’ll explain them in detail using two real-life examples.

Example 1: Employee Benefits

Let’s consider an employee with a CTC of $60,000 per year. This CTC includes not only the basic salary but also various benefits that the employer provides, such as health insurance, retirement contributions, bonuses, and other perks.

  • Basic Salary: $45,000
  • Health Insurance: $5,000
  • Retirement Contributions: $5,000
  • Annual Bonus: $3,000
  • Other Perks: $2,000

Actual Take-Home Pay: $45,000

In this example, the CTC is $60,000, but the actual take-home pay is $45,000. The remaining $15,000 is allocated to various benefits and contributions provided by the employer. These benefits enhance the overall compensation package but may not directly contribute to the employee’s monthly salary.

Example 2: Statutory Deductions and Taxes

Let’s consider another employee with a CTC of $70,000 per year. This CTC includes the basic salary and benefits. However, the actual take-home pay is further reduced by statutory deductions and taxes.

  • Basic Salary: $55,000
  • Health Insurance: $7,000
  • Provident Fund Contributions: $5,000
  • Other Benefits: $3,000

Gross CTC: $70,000

Now, let’s consider statutory deductions and taxes:

  • Income Tax: $5,000
  • Employee Provident Fund Contribution: $5,000
  • Professional Tax: $500

Net Take-Home Pay: $54,500

In this example, the CTC is $70,000, but after statutory deductions and taxes, the actual net take-home pay is $54,500. Statutory deductions and taxes are subtracted from the gross CTC to arrive at the employee’s net pay.

In summary, the CTC is a comprehensive figure that includes various components such as basic salary, benefits, and allowances. The difference between the CTC and the actual take-home pay is due to factors like benefits, statutory deductions, and taxes, which are part of the overall employment arrangement. Understanding the components of the CTC provides employees with a clearer picture of their total compensation package.


Tier 2 cities in India have recorded higher CTC per annum, Mumbai being topmost with an average of R36 lakhs per annum, whereas Bengaluru follows with Rs 18 lakhs per annum for middle and Rs 7 lakhs per annum for entry levels.

Have you accepted any offer letter based on the cost to the company salary mentioned in the offer letter and regretted it?

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