Cost to Company (CTC) - Peeling the Onion

If you are planning your R2I and looking for a job in India, you need to have a good understanding of Cost-to-Company (CTC). CTC is the total money that company gives you - in some form or the other. If you expect your monthly salary to be (CTC/12 - appropriate tax deductions) you are going to be wrong ! The reality is - your monthly pay check will be way less than that.

Now, what is included in CTC? How do you calculate CTC? Is CTC formula common across all the organizations? You'll find answers to these questions and many more in this blog post.


The following are some of the things that are typically included in your CTC.

•     Basic Pay
•     House Rent Allowance (HRA)
•     Dearness Allowance (DA)
•     Conveyance allowance
•     Medical allowance
•     Leave Travel Allowance or Concession (LTA / LTC)
•     Telephone / Mobile Phone Allowance
•     Incentives or bonuses
•     Special Allowance
•     Company’s contribution to Provident Fund (PF)
•     Reimbursements (Medical Bills, Phone bills, magazine subscriptions)
•     Life Insurance
•     Health insurance

There are various tax exemptions that the government provides for many of these items. For example, you are eligible for tax exemptions for the HRA (if you are renting a home or if you have got a home loan to pay off.  All you need to do is just produce bills/proof.

The concept of CTC is very prevalent in India. However, the components of CTC vary from one company to the other. There is no common formula to calculate CTC. It is typically the SUM of all the promises that your company makes to you in-terms of payments/benefits.

It is perfectly fine to ask the HR person "How much would be my monthly take home salary". The HR person may give you a honest/straight-forward answer or a wishy-washy response. If he/she gives you a 'wishy-washy response', you can probe further to understand your REAL monthly take home salary.

Whenever your employer says that your CTC is "so much" - ask for a split-up. The split-up should give you an idea of how much you would get in your monthly pay check. Don't feel shy to peel the onion. When it comes to understanding your CTC, you'll cry if you don't peel the onion at the right time.

Also read:

10 tips for R2I salary negotiation
How much money is needed to R2I