D/W: CTC and Take Home Salary – Explanation with Example
Is you are in same dilemma like whats the difference between CTC and take home loan income? So our article helps you know about in easy way which helps you in every aspect. So read step by step to understand the difference below:
What is CTC?
CTC or Cost to Company is the total expenditure a company would be incurring once it employs you. It includes both monetary and non-monetary perquisites, such as basic salary, dearness allowance, conveyance allowance, training costs, House Rent Allowance, Transportation allowance, medical reimbursements, Leave Travel Allowances, mobile/ telephone bills allowances, etc that are borne by the company to keep you employed.
What is your take home salary?
Take home salary or pay is that portion of your salary that an employee actually gets to take home after paying all deductions and taxes. Thus, this is the amount that you actually get to spend. It is very important that you understand the difference between a CTC and your take home salary as this will directly affect your budget allocations for short term as well as long term. Let us understand this with the help of an example:
| Salary component | Amount (INR) | Taxable amount (INR) |
| Basic salary | 400,000 | 400,000 |
| House Rent Allowance (HRA)-note 1 | 100,000 | 0 |
| Conveyance Allowance | 29,200 | 0 |
| Entertainment Allowance | 12,000 | 12,000 |
| Children Education Allowance | 4,000 | 0 |
| Medical Reimbursements | 15,000 | 0 |
| Gross salary | 560,200 | 412,000 |
| Medical Insurance | 3,000 | |
| Provident Fund (PF)(12% of Basic salary) | 36,000 | |
| Total Benefit | 39,000 | |
| CTC = Gross salary + Benefit | 592,200 |
Break-up of take home salary:
| Deduction/ take home salary | Amount (INR) |
| Tax (as per slab rate)-note 2 | 14,686 |
| Employee Provident fund(12% of basic salary) | 36,000 |
| Professional tax | 2,500 |
| Total deduction | 53,186 |
| Gross salary | 560,200 |
| Net salary(Gross salary – total deductions) | 539,014 |
| Monthly take home salary | 44,917 |
Note 2: Assuming the assessee is not a senior citizen, the minimum exemption limit is INR 250,000, above which tax rate is applied at the following rates:
| Slabs | Rate of tax |
| Upto 250,000 | NIL |
| 250,001-500,000 | 10% |
| 500,000-1,000,000 | 20% |
| Above 1,000,000 | 30% |
Since, the taxable income is INR 412,000, as per the above slab rate, tax is levied @ 10% plus 3% education cess. Further rebate under section 87A is allowed to an individual earning upto INR 500,000.
Tax calculated is as follows:
| Particulars | Amount (INR) |
| Upto 250,000 | NIL |
| 412,000-250,000 | 162000 X 0.10= 16200 |
| Education cess @ 3% | 16,200 X 0.03= 486 |
| Total tax | 16,686 |
| Rebate u/s 87A* | 2,000 |
| Net tax | 14,686 |
*It is proposed to amend section 87A by increasing the maximum amount of rebate available from existing INR 2,000 to INR 5,000 with effect from 1st April 2017.