How To Calculate CTC?
Cost To Company abbreviated as CTC is the all-inclusive annual package that sums up every expense made by employers for their employees in a year. It is the total amount (remuneration) offered to a candidate after he/ she has been shortlisted to start working with the organization.
Vaguely speaking, CTC equals the sum of earnings of an employee and the deductions made from his salary, both direct and indirect.
CTC = Earnings + Deductions
However, there is a universal CTC calculator to compute the same. The total amount includes monthly components such as Basic Pay, Allowances and Reimbursements as well as yearly elements like Gratuity and Annual Bonus etc.
A lot of people know about this term and what it stands for, but the most frequently asked question is: how to calculate CTC?
Let us walk through an in-depth explanation to this question:
There are a number of earnings that an employee gets, for instance, Basic Pay, Dearness Allowance, House Rent Allowance, House Rent Allowance, Conveyance Allowance and other allowances.
Similarly, there are deductions from the salary too such as Employees’ Provident Fund, Employees’ State Insurance, Professional Taxes, Tax Deducted At The Source among other deductions.
Now, using a salary calculator, you can simply enter the digits and you will get the CTC as output automatically.
Check it: CTC Breakup
If an employee earns a Basic Salary of INR 10,000, Dearness Allowance of INR 3,000, HRA of INR 5,000, Conveyance Allowance of INR 1,000, Medical Claim of INR 2,000 and Special Allowance of INR 12,000
The deductions from his salary include Professional Tax of INR 500, EPF of INR 1,500 and ESI of INR 500, then as per the salary calculator India uses, the CTC would be Earnings minus Deductions, i.e.,
[10,000 + 3,000 + 5,000 + 1,000 + 2,000 + 12,000 – (500 + 1,500 + 500)] = (33,000 – 2,500) = INR 30,500
Hence, it all comes down to a basic fact that CTC is nothing but ultimately the total deductions applicable subtracted from the the total earnings of an employee.