What Is CTC in Salary? (Meaning, Full Form & Breakdown Explained)
What Is CTC?
CTC stands for Cost to Company. It refers to the total amount a company spends on an employee in one year, including salary, benefits, and statutory contributions.
Important: CTC is not the amount you receive in your bank account.
CTC Meaning in Salary (Simple Explanation)
CTC includes:
- Gross salary
- Employer contributions (PF, gratuity)
- Bonuses and benefits
Your in-hand (take-home) salary is calculated after deductions like:
- Employee PF contribution
- Income tax
- Professional tax (if applicable)
👉 Not sure what your real salary is? Calculate your in-hand salary instantly.
Components of CTC (Salary Breakdown)
1️⃣ Basic Salary
- Core part of your salary structure
- Usually 35–50% of CTC
- Used to calculate PF and gratuity
2️⃣ House Rent Allowance (HRA)
- Paid if you live in a rented house
- Can provide tax exemption under the old tax regime
3️⃣ Allowances
- Special allowance
- Conveyance allowance
- Medical allowance
- Leave Travel Allowance (LTA)
4️⃣ Employer Provident Fund (PF)
- Employer contributes 12% of basic salary
- Included in CTC
- Not paid monthly to you
5️⃣ Gratuity
- Applicable only after completing 5+ years
- Included in CTC but not received monthly
Gratuity = (Basic Salary × 15 × Years of Service) / 266️⃣ Bonus / Variable Pay
- Performance-based
- Paid annually or quarterly
- Not guaranteed
Example: ₹10 LPA CTC Breakdown
| Component | Amount (₹ / year) |
|---|---|
| Basic Salary | 4,00,000 |
| HRA | 2,00,000 |
| Other Allowances | 2,00,000 |
| Employer PF | 48,000 |
| Gratuity | 19,200 |
| Total CTC | 10,00,000 |
CTC vs Gross Salary vs In-Hand Salary
| Term | Meaning |
|---|---|
| CTC | Total cost incurred by the company |
| Gross Salary | Salary before deductions |
| In-Hand Salary | Amount credited to your bank |
Related Guides
Calculate In-Hand Salary from CTCFrequently Asked Questions
What is CTC full form?
CTC stands for Cost to Company. It represents the total amount a company spends on an employee in a year, including salary, benefits, and statutory contributions.
Is PF part of CTC?
Yes, the employer’s Provident Fund (PF) contribution is included as part of CTC, even though it is not paid directly to the employee each month.
Is gratuity included in CTC?
Yes, gratuity is included in CTC, but it is payable only after completing at least 5 years of continuous service with the employer.
Why is in-hand salary less than CTC?
In-hand salary is less than CTC because CTC includes PF, gratuity, bonuses, and taxes that are not paid as monthly cash.
How is in-hand salary calculated from CTC?
In-hand salary is calculated by subtracting employee PF, income tax, and professional tax from gross salary. Employer PF and gratuity are included in CTC but not received monthly.