How do you break down a CTC?

CTC = Earnings + Deductions Here, Earnings = Basic Salary + Dearness Allowance + House Rent Allowance + Conveyance Allowance + Medical Allowance + Special Allowance.

Is leave encashment a part of CTC?

The gratuity and the encashment of earned leave may not form part of CTC. Gratuity is a real payment but is payable depending upon certain conditions, ie, continuous service of 5 years and the last drawn salary. If these conditions are mentioned, there is no illegality in including the amount in the CTC.

How much percentage should be basic salary?

Basic salary is always taxable and should, therefore, not be more than 40\% of the cost to company. However, it should also not be kept too low since it will then result in reduction in the other constituents of the salary.

Does joining bonus come under CTC?

Joining Bonus (or Sign-on bonus) is the bonus that the company pays you when you join the company. It is generally around 10\% of your CTC. Understand that it will not be paid every year. It is mostly used to stuff the CTC to show that the package is very good.

Is performance bonus included in CTC?

The CTC typically includes fixed heads such as basic pay (which ranges around 40-50\% of the CTC), home rent allowance (which ranges around 40-50\% of the basic salary), employees’ provident fund (EPF), gratuity, other reimbursements such as car fuel and mobile bills etc., and variable components such as annual bonus and …

What is CTC breakup?

It is basically the whole salary package of the employee. He may not get all of it as cash in hand, Some amount can be cut in the name of PF and medical insurance, etc. CTC = Gross Salary + PF + Gratuity.

How is hand salary calculated from CTC in India?

1. Usual salary structure components (fixed) of salary of an Employee.
2. CTC offered by the employer = INR 9 Lakh per year;
3. In hand Salary = CTC – Sum of above components.
4. Net taxable income** (Old Tax Regime) = CTC – PF contributions (Both employee & employer contribution) – Food Coupons – HRA tax exemption.

Why do companies include gratuity on CTC?

“Gratuity is not included in the CTC because it has a time bar. According to HR experts, gratuity is a ‘statutory benefit’ paid to the employees who have rendered continuous service for at least five years. It is a lump sum amount paid to an employee based on the duration of his/her total service.

What is CEA in salary slip?

CEA means Child Education Allowance. Child Education Allowance is the allowance paid by the employer to educate the children of their employees. Govt employees mandatorily get Child Education Allowance.

What are the expenses that make up CTC in India?

The final category of expenses that make up CTC in India include employee retirement saving contributions paid by the employer, including: Under this retirement schema, the employers contributes a specific amount of money into the employee’s retirement account.

How does a company add CTC to your salary?

However, the company adds all these to your CTC figure, as it is paying for it. Another famous trick played by companies (especially those in sectors that are performance based) is to add a considerable amount of variable component to the salary and keep the fixed part small.

What are the simple tricks employers play on your CTC?

Another simple trick employers play is to add your Stock Options to your CTC. Stock Options again are not a regular payment source, however they do increase the CTC considerably. You can learn about stock options, RSU’s and ESPP here in this article.

Is your CTC number inordinately inflated?

However, in the case of larger companies, the CTC number is inordinately inflated and your eventual take home salary might give you the feeling – “Seems like there is some mistake in the calculation”. Joining other company for higher Salary?