What Is the Difference Between CTC and In-Hand Salary? Let’s Find Out!

Are you happy to see a large CTC in the offer letter? Did you know that the in-hand salary can be much less! Easily understand the actual amount received in hand due to PF, TDS, bonus and other deductions.

CTC (Cost to Company) is the total amount spent by the company on an employee in a year, and in-hand salary (Net Salary) is the actual amount received in hand in a month after deducting PF, gratuity and tax.

In simple words, CTC is the annual total package and in-hand is the net amount of monthly salary, which is usually much less than CTC.

Detailed discussion: CTC vs. In-hand Salary:

* CTC (Cost to Company – CTC): This is the annual amount of the offer letter received from the company, which includes basic salary (Basic), allowances (HRA, DA, Medical), provident fund (PF – employer’s share), gratuity and other benefits. This is not your actual income, but the total cost of the company to you.

* In-hand Salary (Take-home/Net Salary): This is the actual money deposited in your bank account at the end of the month. It is calculated by deducting Income Tax (TDS), Provident Fund (PF – employee’s share) and other statutory deductions from the Gross Salary.

Key points to understand the difference:

1. PF and Gratuity: CTC includes the employer’s share of PF and gratuity, which are not available in hand every month.

2. Tax (TDS): Deducting income tax from CTC further reduces the in-hand salary.

3. Other Deductions: Professional Tax or other insurance deductions also reduce the in-hand salary.

Simple Example: Suppose your annual CTC is 6 lakhs (50,000 rupees per month). But, if 8-10 thousand taka is deducted per month for PF, gratuity and tax, then your in-hand salary will be around 40-42 thousand taka.

Therefore, when changing jobs or joining, you should not only look at the CTC, but also know what your ‘in-hand’ or ‘net’ salary will be at the end of the month.