CTC vs In-Hand Salary: What’s the difference?

As women step into professional life & negotiate salaries, understanding the difference between CTC (Cost to Company) and in-hand salary is very essential. We get excited about a high CTC number, but what matters more is how much you’ll actually receive in your hand each month to utilize. Understanding this can help you plan your finances, manage your expenses, and even make informed decisions when accepting a job offer.

In this blog, we’ll break down what CTC really means, the difference between CTC and net salary or in-hand salary, in-hand salary calculation, and what you should be looking for when reviewing your pay package.

Let’s understand CTC vs in-hand salary in detail,

What is CTC (Cost to Company)?

CTC means nothing but Cost to Company and it represents the total amount your employer will spend on you in a year. It’s the overall package that includes everything your basic salary, allowances, bonuses, perks, and even contributions to funds like the Employee Provident Fund (EPF), National Pension Scheme (NPS), and insurance.
Think of CTC as the total cost of hiring you. But this doesn’t mean it’s the money you’ll get in your bank account every month. 

What is the In-Hand Salary?

In-hand salary is the actual amount you receive in-hand in your bank account each month after all deductions like taxes, EPF, NPS, health insurance or any other contributions. So, your in-hand salary is always less than your CTC because of these deductions. This is what you can utilize for your day-to-day expenses, savings, and investments.

Click here to Calculate in-hand salary 

Key Components of CTC

Let’s understand how CTC breaks down into your in-hand salary, here are some key parts of it:

• Basic Salary: This forms the core part of your CTC and is fully taxable.
• Allowances: Includes things like House Rent Allowance (HRA), Travel Allowance, Food Allowance and Medical Allowance. Some of these are partially tax-exempt based on how you spend them.
• Bonuses/Performance Incentives: These are added to your CTC but may be paid only annually or based on certain conditions.
• Provident Fund and Gratuity: Your employer’s contribution to the Provident Fund (PF) or Gratuity is also included in CTC, but it’s deducted before you get your in-hand salary.
• Taxes: Income tax and professional tax are also deducted from your salary based on your tax bracket before you receive your in-hand salary.

Why is In-Hand Salary Lower than CTC?

The main reason your in-hand salary is lower than your CTC is because of all the deductions.

What Should You Focus On?

When negotiating your salary or comparing job offers, it’s crucial to understand the difference between CTC and in-hand salary. A high CTC doesn’t always mean a high take-home salary. Always ask for a detailed salary breakup and focus on what you’ll actually receive every month after deductions.
Knowing this can help you better decide  whether you should accept the job offer or not.

As you have understood the major difference between CTC & in-hand salary, now it is also essential for you to understand how to effectively budget your income. Ideally, you should save & invest at least 20% of your income & the rest you can utilize for other expenses.

You can use this easy Lxme Budget planner to effectively budget your income & start saving & investing with Lxme’s expert-curated mutual fund portfolios.

For women, understanding the difference between CTC and net salary is empowering. It’s not just about a big number on your offer letter; it’s about knowing what you’ll take home and how you can use it to achieve your financial goals. By understanding your salary package better, you can make smarter decisions for yourself, negotiate better offers, and plan your financial journey with confidence. Now easily calculate salary & along with start investing for the same. 

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