Know Everything about CTC (Cost to Company) you need to know as a employee

When you receive your job offer specially first time, one of the most exciting things to look at is the salary package. But often, freshers get confused when they see terms like CTC in the offer letter. Let’s break it down in simple words so you can clearly understand what it means and why it matters.

We have covered What is CTC, How to check CTC, What is CTC in Salary, What is Gross etc.

What is CTC and What is CTC in Salary with Example?

The full form of CTC (Cost to Company) in another term CTC in salary but broadly described by Company. It refers to the total Company spends on an employee annually. This is not just your take-home salary but also includes other benefits, allowances, and contributions that the company makes on your behalf.

Think of CTC as the “price tag” of hiring you—it covers every expense related to your employment. Now Let’s see example to understand CTC

Example to Understand CTC

Imagine you join a company as a fresher and agree on a salary of ₹20,000 per month. At first, you might think your yearly salary is ₹20,000 × 12 = ₹2,40,000. But when the company prepares your CTC, it adds many other components. For example:

• Basic Salary: ₹20,000 per month = ₹2,40,000 annually
  
• House Rent Allowance (HRA): ₹5,000 per month = ₹60,000 annually
  
• Meal/Coupon Benefits: ₹1,000 per month = ₹12,000 annually
  
• Educational Allowance: ₹2,000 per month = ₹24,000 annually
  
• Employer’s PF Contribution: ₹21,600 annually (for example, 12% of basic salary)
  
• ESIC Contribution/Other Benefits: Suppose ₹2,400 annually
• Others (Like Bonus, Gratuity etc.)
  

Now, if you add up all these figures, the total becomes approximately ₹4,00,000 per year.

This is the amount the company spends on you in one financial year, which is why they mention CTC = ₹4,00,000 in your offer letter.

Now you just have understood that CTC is not what you will get In-hand.

CTC vs Take-Home Salary

It’s very important to understand that CTC is not equal to your in-hand salary. You need to always understand in-hand salary is most important.

• Your take-home salary is what you actually receive in your bank account every month after deductions like income tax, PF contribution (employee’s share), and professional tax.
  
• Your CTC, on the other hand, includes the total cost borne by the employer—both what you receive directly and what the company pays indirectly on your behalf.
  

For example, in the case above, although your CTC is ₹4,00,000, your in-hand monthly salary will be less than ₹20,000 after these deductions.

So, the next time you get an offer letter that says “CTC ₹4,00,000,” you’ll know exactly what it means—it’s the company’s total expense on you, not the exact cash you’ll pocket every month. So don’t discuss CTC in your Interview discuss In hand Salary per month.