CTC vs. Take-Home Salary: Decoding Your Compensation Package

• CTC (Cost to Company) is the total annual expense a company incurs on an employee, including basic pay, allowances, benefits, and employer contributions.
• Basic Salary is the core component, typically 30-50% of CTC, but new labor codes mandate it to be at least 50% of CTC.
• House Rent Allowance (HRA) covers housing costs and offers tax benefits under Section 10(13A) of the Income Tax Act for rented accommodation (old tax regime only).
• Employee Provident Fund (EPF) involves a 12% employer contribution on basic salary, which is part of CTC but not immediate take-home pay.
• Gratuity is a statutory benefit for employees with over five years of service, with a 4.81% contribution, rewarding loyalty.

Why It Matters: Understanding CTC components is crucial for negotiating salary and knowing your actual take-home pay.