Cost to company

From Wikipedia, the free encyclopedia
Jump to: navigation, search

‹See Tfd›

Cost to company (CTC) is a term for the total salary package of an employee, used in countries such as India and South Africa. It indicates the total amount of expenses an employer (organization) spends on an employee during one year. It is calculated by adding salary to the cost of all additional benefits an employee receives during the service period. If an employee's salary is 50,000 and the company pays an additional ₹5,000 for their health insurance, the CTC is ₹55,000. Employees may not directly receive the CTC amount.

Difference between CTC and pay slips[edit]

The CTC can include many elements in addition to salary/wages, such as health care, pension and allowances for housing, travel and entertainment. Tax is also deducted from the cash amount the employee receives directly. The term CTC is a trick used by companies in India to make employees believe that they are a cost to a company than a asset with which a company generates revenue. A hypothetical breakdown of CTC is given below:

Component of salary Amount (₹) Taxable amount
Basic salary 2,40,000 2,40,000
House rent allowance 60,000 36,000
Conveyance allowance 8,000 0
Entertainment allowance 6,000 6,000
Overtime allowance 6,000 6,000
Medical reimbursements 10,000 0
Gross salary 3,30,000 2,88,000
Medical insurance 3,000
PF (12% of basic salary) 28,800
Total benefit 31,800
CTC = gross salary + benefit 3,61,800

Break up of take home salary:

Deductions/take home salary Amount
Tax (10% of taxable amount) 28,800
Employee provident fund (12% of basic salary) 28,800
Professional tax 2,500
Total deduction 60,100
Gross salary 3,30,000
Net salary (gross - deduction) 2,69,900
Monthly take home salary 22,491

References[edit]

See also[edit]