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.

In this blog, we will walk you through some of the commonly asked questions revolving around CTC by working professionals as follows:
- How To Calculate CTC?
- How To Calculate Basic Salary from CTC?
- How To Calculate In-Hand Salary from CTC?
- How To Calculate Gross Salary from CTC?
- How To Calculate Gratuity In CTC?
How To Calculate CTC?
On a basic level of understanding, CTC equals the sum of earnings of an employee minus 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.
Want to decode all the salary components of your payslip?
For instance,
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
and,
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 total earnings of an employee.
How To Calculate Basic Salary From CTC?
There is a simple formula that can help derive basic salary from CTC:
CTC = Earnings + Deductions
wherein,
Earnings = Basic Salary + Dearness Allowance + House Rent Allowance + Conveyance Allowance + Medical Allowance + Special Allowances
Thus,
Basic Salary would be equal to Earnings – (Dearness Allowance + House Rent Allowance + Conveyance Allowance + Medical Allowance + Special Allowances)
How To Calculate In Hand Salary From CTC?
The In-hand Salary, also known as Take-home or Net Salary can be calculated with the help of CTC as follows:
Calculate Gross Salary
Gross Salary = CTC – (EPF + Gratuity)
Calculate Taxable Income
Taxable Income = Income (Gross Salary + Other Income) – Deductions
Calculate Income Tax
Income Tax = Check the tax slab in which you lie to know the applicable Income Tax
Calculate In-hand Salary
In-hand Salary = Basic Salary + Actual HRA + Special Allowances – Income Tax – EPF (Employees’ Provident Fund)
How To Calculate Gross Salary From CTC?
Gross Salary is the sum of all the earnings, profits, interest payments, reimbursements, and other forms of payment without any deductions.
There is a basic formula for calculating the Gross Salary from CTC mentioned below:
Gross Salary = CTC – (EPF + Gratuity)
How To Calculate Gratuity In CTC?
During the period of employment, the employer shows gratitude to the employees for their extraordinary service and hard work by offering the gratuity benefit. Under The Payment of Gratuity Act, 1972, gratuity is calculated as 4.81% of the Basic Pay.
The simplest formula to calculate Gratuity earned by an employee using CTC amount is as follows:
Gratuity = 15/26 * Last Drawn Salary (Basic Salary + Dearness Allowance) * Number of Completed Years of Service
Gratuity can only be withdrawn after the completion of minimum five years in the same organization, at the time of leaving or retirement from the job.
detail.