GK: What Is The Difference Between CTC And In Hand Salary?

CTC (Cost To Company): CTC is the total amount an employer spends on an employee per year. It is not what you receive in your bank account, but rather the cumulative cost of your employment to the organization. It includes your direct salary, indirect benefits (like health insurance or taxi services), and mandatory contributions like the Employee Provident Fund (EPF) and Gratuity. 

Many CTC packages include “Performance Linked Incentives” or bonuses. These are only paid if you or the company meet specific targets, making the CTC a maximum potential figure.

Items like food coupons (Sodexo), gym memberships, or leased car facilities are added to the CTC value because they represent a financial cost to the company. 

CTC is the figure usually quoted during recruitment or in offer letters. It sounds much higher than the monthly payout to make the compensation package look more attractive. (Negotiation tip: When negotiating, focus on the “Fixed Component” rather than the total CTC, as the fixed part dictates your monthly cash flow and future hike percentages.) 

In-Hand Salary: This is the actual amount credited to your bank account every month. It is what remains after all statutory deductions and taxes are removed from your gross monthly pay. 

If your company provides a group health insurance policy, the premium for your dependents might be deducted from your monthly salary, affecting the final in-hand amount.

In months where you receive a festival bonus or performance incentive, your in-hand salary will spike, though these amounts are also subject to heavy tax. If you have taken a salary advance or a company loan, the Equated Monthly Installment (EMI) is deducted at the source, further reducing your monthly in-hand credit. 

Tax Deduction: Tax Deducted at Source (TDS) is the income tax the employer withholds from your salary and pays to the government on your behalf throughout the financial year. Tax is deducted based on the “Slab System.” Higher earners fall into higher tax brackets, meaning a larger percentage of their CTC is diverted to the government. (Image: File)