From cost to company to take-home: three salary figures reconciled

01

The three figures

• CTC (cost to company) is everything the employer spends on the employee in a year: gross salary plus employer contributions and benefits such as employer PF, employer ESI where it applies, gratuity provision and insurance premiums.
• Gross salary is the total of earnings before deductions: basic, allowances and other fixed pay components paid to the employee.
• Net salary (take-home) is gross minus deductions: employee PF, employee ESI where it applies, Professional Tax where the state levies it, TDS and any other recoveries.

02

What sits between them

Watch for itVariable pay and annual bonuses are often included in CTC but paid only if earned. A CTC that includes them overstates the guaranteed monthly figure.

03

Why the figures drift apart

The gap between CTC and gross depends mostly on basic pay, because PF and gratuity are calculated on it, and on whether employer PF is paid on full basic or on the ₹15,000 wage ceiling.

The gap between gross and net depends on the employee's tax position and regime choice, state of work and ESI coverage (wages up to ₹21,000 a month), so two people with the same CTC can take home different amounts.

04

Which figure to use where

• Offer letters: show CTC and the monthly gross, itemised so the candidate can see the employer costs.
• Budgets: use CTC, because it is what the employer spends.
• Conversations about take-home: use an estimated net, with a clear note that tax depends on declarations.