One of the most surprising experiences for freshers and even professionals is getting their first salary into their bank accounts. This salary is always less than what was written in the offer letter and this makes many people think about what happened with the rest of the money. This mystery can be explained by the difference between CTC (cost to company) and in-hand salary.

What Is CTC?

CTC is the total sum of money that the company invests in the employee throughout one year. This is not just the basic salary of the person, but it is also made up of allowances, benefits, bonuses and the company’s contribution to schemes like EPF (Employees’ Provident Fund). Since CTC is the total cost of the company, it is never the amount that will be credited into your account.

What Is In-Hand Salary?

In-hand salary, which is also known as take-home salary, is the net amount that is left after deducting the required amounts from the total salary.

Why Is Your Take-Home Salary Lower?

There are a number of deductions which affect your salary each month. One of the most popular deduction is the deduction made for EPF contribution which contributes towards your retirement savings. Income tax or TDS depends on your salary and tax slab. Professional tax, insurance or other deduction could be among the list of deductions from your salary. Though the deductions make your take home salary lower, they help you build your financial security.

Employer Contributions Form Part of CTC

One of the facts that most employees ignore is the contributions made by the employer towards the EPF and others which form a part of the CTC. These are not part of your monthly pay but rather a part of your total compensation.

Why Knowing Your Salary Structure Is Important

Knowing your salary structure can help you budget your finances much better. This can help you in figuring out how much money is coming in each month, what benefits you have and how you should save and invest. While considering any job offers, it would always be a smart move to check your salary structure rather than CTC alone.

Understand More Than Just the CTC of Your Salary

While your CTC and take-home salary are different things, knowing that can prevent you from being confused and help you budget much better. Instead of concentrating on CTC alone, know about the various parts of your salary structure and its advantages.

Connect with Aetram if you want to understand your salary, taxes and personal finances better.

FAQs

1. What is the difference between CTC and in-hand salary?
CTC is the total annual cost to the company, while in-hand salary is the amount you receive after deductions.

2. Why is my in-hand salary lower than my CTC?
Deductions such as EPF, taxes and other contributions reduce your monthly take-home pay.

3. Is the employer’s EPF contribution part of my CTC?
Yes, the employer’s EPF contribution is generally included in the overall CTC.

4. Can my in-hand salary change over time?
Yes, it may change due to salary revisions, tax changes, bonuses or adjustments in deductions.

5. Should I look only at the CTC before accepting a job?
No. Always review the complete salary structure, including deductions, benefits and expected in-hand salary, before making a decision.