Are you worried or stressed? Click here for Expert Advice

Understanding the difference between CTC, Gross and Take Home Salary

Krishnendu Chatterjee

The joy of getting the first job is beyond words. For freshers the joy of receiving first salary is an incredible experience to fulfill dreams that they have planned since long. However don’t let this happiness become an obstacle in the process of negotiating your first salary in terms of the Take home amount being offered against the promised CTC (Cost to Company).

CTC and take home salary are two distinct amounts that are mentioned separately on the offer letter. Freshers who have less knowledge about such terms often regret about this experience only after receiving their first salary. They assume their CTC as their Take Home salary, and when the salary gets credited in bank account, it disappoints their high hopes.

Take for example, the company offered you a CTC of Rs. 4 Lakhs per annum, which makes it somewhere round 40,000 per month. However, when you receive the salary at the end of the month, you receive only Rs. 34,000 in your back account. The difference of Rs.6000/- becomes a bone of contention for the freshers?

There’s a logic behind this difference in the expected and actual amount. The difference of Rs. 6000/- is due to CTC and Take home salary offered. Understand this difference carefully so as to negotiate salary in your next job with a clear vision:

Trending Now

Basic difference between CTC & Take Home Salaries:

CTC stands for Cost to Company. It is the sum of total amount a company is spending for an employee in a year. It includes the Take Home Salary along-with other benefits such as medical facilities, travel allowance, company contributions to retirement funds, house bills and travel allowance.

Let’s understand CTC and Take Home salary in a better way with the help of this break-up:

An example of Break-up of CTC per annum

Salary parts


Basic Salary

Rs. 60,000

Travel allowance

Rs. 8,000

House Rent Allowance

Rs. 30,000

Entertainment Allowance

Rs. 6,000

Medical Reimbursement

Rs. 10,000

Gross salary  =                                                       Rs. 1,14,000

PF Contribution (12% of the basic salary)

Rs. 7,200

Medical Insurance

Rs. 3,000

Total Benefit  =                                                      Rs. 10,200

CTC = Gross Salary + Benefit =                        Rs. 1,24,200 

Break up of Deduction and take home salary

Deductions/Take home salary


Employee’s PF (12% of basic salary) 

Rs. 7,200

Gross salary

Rs. 1,14,000

Net Take home salary after deduction

Rs. 1,06,800

Take home lesson: Since the salary bracket doesn’t fall under taxable income, there’s no income tax deductions mentioned.

To summarize, the difference between CTC and take home salary, take a look at the following calculations:

CTC (Cost to Company): Saving contribution + Direct & Indirect benefits.

Take Home Salary = Employee Provident Fund – Direct Benefits – Income Tax – Other Deductions (varies from company to company)

How to make the most of CTC being offered?

Make sure to increase the direct benefit component included in CTC while negotiating with the employer.

Tricks to enhance the direct benefit from salary:

1. Ask the employer to offer conveyance allowance (direct benefit) instead of transportation exemption (indirect benefit).

2. You can also ask the employer to convert your subsidized food bills to food allowance to avail the advantage of direct benefits.  

3. If the company is offering you ESI benefits as health cover, ask the employer to convert health cover into medical reimbursement as it will benefit your more in terms of services and will also escalate take home component of salary.

3. You can also ask your employer for family health insurance plan instead of opting for personal health plans.

4. Opt for conveyance allowance rather than picking pick and drop facility as the conveyance allowance is tax free.

Remember that the components of salary that includes perks and other allowances vary from company to company. Therefore, while negotiating salary seek explanation on each and every component of the CTC to avail maximum possible benefit.

Hope these insights will help you to negotiate the best pay package in a smart way with your employer. In case, you have any doubts or suggestions, please feel free to share your views in the comment box below. You can also share this article in your circle to let your friends know about the difference between CTC and Take Home Salary. Stay updated with similar stories, and subscribe to our newsletter at

रोमांचक गेम्स खेलें और जीतें एक लाख रुपए तक कैश

Related Categories

Live users reading now