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Ankit Sharma, 22, an engineering graduate, was happy as he got placement through
campus interview and was offered a salary package of Rs 3.6 lakh annual CTC (cost to
company). From the first day, he started planning how he wanted to spend his first
salary. But his excitement was dimished when he received the much-awaited pay slip.
Before joining a workforce, many generally have a misconception that the actual take
home salary is same as CTC. But in reality, there is huge difference between the two.
Why CTC is different from pay slip
When Ankit rechecked the details he found that there are many components in CTC
which he won't receive. The HR department at his new office gave him the break up
and said that his maximum entitled limit was only Rs 22,491 a month where according
to the CTC offered, he thought it would be Rs 30,150. It was explained to him that the
employer's contribution to provident fund was part of the CTC but not of his salary.
The same logic is applicable for the company's contribution towards employees'
medical insurance as well.
Income tax and professional tax also got deducted from Ankit's CTC. He would get Rs
22,491 only if he touched the maximum limit of overtime and upon submission of
medical bills worth Rs 15,000.
Break-up of CTC and tax liability is given below:
:
Component of salary
Taxable
amount
Amount (Rs.)
Basic salary
2,40,000
2,40,000
60,000
36,000
Conveyance allowance
8,000
Entertainment allowance
6,000
6,000
Overtime allowance
6,000
6,000
Medical Reimbursements
10,000
Gross salary
3,30,000 2,88,000
Medical insurance
3,000
28,800
Total benefit
31,800
CTC = gross
3,61,800
salary + benefit
Break up of take home salary:
Deductions/take home salary
Tax (10% of taxable amount)
Amount
28,800
28,800
Professional tax
2,500
Total deduction
60,100
Gross salary
3,30,000
2,69,900
22,491
Components of salary
Basic salary: Basic salary is the core salary and it is the fixed part of the compensation
package. A number of other components are calculated in the basic salary. Generally,
the basic salary depends upon the employee's designation or grade.
Allowance: Different types of allowance is given to employees such as house rent
allowance (HRA), leave travel allowance (LTA), dearness allowance, convince
allowance, city compensation allowance and children's education allowance.
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