Understanding the Difference Between CTC vs Take Home Salary

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Salary is the amount of money or compensation paid to an employee by an employer in return for work performed.

What is the difference between CTC & Take Home Salary?

CTC stands for “Cost to Company,” which refers to the total calculation of a salary package that includes all monetary and non-monetary benefits spent on an employee by the company before any tax deductions, whereas Take Home Salary refers to the total salary that an employee receives after all necessary tax and other deductions.

How much is the Basic Salary of CTC?

A basic salary is a fixed base component of a person’s compensation package. It is taxable and usually amounts to 35-50 percent of the total gross salary. However, there is no exact formula for calculating the basic salary.

It is completely up to the employer to decide the exact amount of basic salary and it is usually determined by taking into account an employee’s designation, experience, and industry of work.

What is the formula for salary calculation?

The formula –

  • Take-Home Salary = (Gross Salary) – (Income Tax) – (Employee’s PF Contribution) – (Prof. Tax)
  • Gross Salary = (CTC) – (Employer’s PF Contribution (EPF)) – (Gratuity)
  • Gratuity = (Basic salary) + (Dearness allowance) 15/26 Years of Service
  • Taxable Income = (Gross Salary) – (Employee PF Contribution(s)/PPF Investment)- (Tax-Free Allowance) – (Health Reimbursement Arrangement (HRA)) – {Long-Term Care Insurance (LTC) }- (Medical Insurance)- Savings Investments – Other Deductions.

What is the income tax slab forthe Current Financial Year

The slab is as follows –

  1. Up to 2,50,000: Nil
  2. From Rs.2,50,001 to Rs.5,00,000: 5% + Cess

(Individuals with an income of up to Rs.5 lakh will be eligible for an Rs.12,500 rebate under Section 87A of the Income Tax Act of 1961.)

  1. From Rs.5,00,001 to Rs.7,50,000: 12,500 + 10% of (Taxable income – Rs.5 lakh) + Cess
  2. From Rs.7,50,001 to Rs.10,00,000: 37,500 + 15% of (Taxable income – Rs.7.5 lakh) + Cess
  3. From Rs.10,00,001 to Rs.12,50,000: 75,000 + 20% of (Taxable income – Rs.10 lakh) + Cess
  4. From Rs.12,50,001 to Rs.15,00,000: 1,25,000 + 25% of (Taxable income – Rs.12.5 lakh) + Cess
  5. From Rs 15 lakh and above: 1,87,500 + 30% of (Taxable income – Rs.15 lakh) + Cess.

[Here Cess is the 4% of the taxable income]

[Also surcharge is added at 10%of tax when the taxable amount exceeds  ₹50,00,000]

Conclusion:

A take-home salary calculator is a tool that computes your take-home pay based on the Cost To Company (CTC) or total salary package after all taxes and deductions. If you want to understand this better, you can click here to read more about the tds rate chart to calculate your salary by using the take home salary calculator India.

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