Arriving at the CTC of an Employee

Candidate - Costing Elements

Kevin Rahul Roll No. 14

What is CTC - Cost To Company

O A term which signifies the cost that a company

would incur on you as an employee

O The break up of various elements in CTC would talk

about the basic salary, HRA (House rent allowance) and other such allowances.

What is Take home pay or in-hand salary

O Take home pay is what you actually receive at

the end of month or salary period.

O The in-hand figure is calculated after deducting

income tax (TDS) and other deductions as per company policies.

What all is included in a CTC?

Meaning Of Various Components Here

O Direct benefits: They are paid to you monthly and

form part of your take home subject to income taxes. Basic Salary, HRA, D.A, Conveyance Allowanceetc
O Indirect Benefits: These are the benefits that you

enjoy without paying for them. Your company takes care of them but add their monetary value to your CTC.

Indirect Benefits Components..

O Interest free loans, if any: If your company is providing

you interest free loans for buying a car or a house or any other need. O They will add the monetary value of the interest benefit that you will get out of NOT paying it, to your CTC.
O Food Coupons / Subsidized meals: Most of the big

companies offer free lunch and evening snacks at workplace. O Do you think these are FREE? No way, you would certainly find them added in yourCTC.

Cont..
O Company Leased Accommodation: This benefit

saves you from the tension of finding a home and negotiating on rent deals. O Your company provides you with home and pays rent to the landlord directly O It, will add the monetary value of this benefit to your CTC. O Medical and Life Insurance premiums paid by company

Cont..
O Income tax savings: Sometimes companies offer

you some benefits which are tax free for you but are taxable for them. O For example, if you receive allowances, they are subjected to FBT (Fringe benefit tax) O it is paid by your employer and not you. But some companies do add the value of tax that you saved and they paid in your CTC.

Cont..
O Office Space Rent: Some companies, if the

company is spending INR 7000 per month on the cubicle that you would sit in, they would add the yearly cost of this in your CTC. O This means that INR 84,000 (12*7000) will form part of your pay package even though you will never get it!!

3. Saving Contributions:
O They are contributions made to your long term

savings account by your employer. O They do not form part of your monthly take home but belong to you and you may or may not get them in long term.
O Superannuation Benefits: These are long term

pension type schemes mostly offered bymultinational companies. O A predefined amount is contributed every month in your superannuationaccount and you can withdraw it after you retire or leave the organization

Cont..
O Employer Provident fund Contribution: This forms part

O O O

of your CTC and your employer contributes about 12% of basic salary every month. This amount keeps accumulating in your PF account and you can withdraw it at the time of leaving the company Gratuity: Again, forms part of your CTC but is added to your gratuity account annually. This has a time limit of 5 years attached to it. If you leave the company anytime before 5 years, you will NOT get anything from your earlier year's accumulation of this amount

So, as a general rule, the CTC and take home pay can be defined as:
O CTC = Direct benefits + Indirect benefits +

Saving Contributions
O Take Home pay = Direct Benefits - Income

tax - Employee PF - Other deductions, if any

THANK YOU.