Cost to company, examples

1. COSTTO COMPANY(CTC)
&
SALARY BREAKUP
BY:
KARISHMA GANJOO

2. COSTTO COMPANY(CTC)
• CTC or Cost to Company is the total amount that a company spends (directly or
indirectly) on an employee. It refers to the total salary package of the employee.
• CTC is never equal to the amount of take-home salary of the employee.
CTC = Gross Salary + PF + Gratuity

3. BASIC SALARY
• Basic salary is the base income of an individual. It is a fixed part of one's
compensation package.
• It is usually the largest component of the CTC making up for 40-45% of the total
CTC. The basic plays an important role in defining the salary as other components
like Provident Fund, Gratuity and ESIC are dependent on it.

4. GROSS SALARY
• Gross salary is the amount calculated by adding up one's basic salary and
allowances, before deduction of taxes and other deductions. It includes bonuses,
over-time pay, holiday pay, and other differentials.
• Gross Salary = Basic Salary + HRA + Other Allowances

5. NET SALARY ORTAKE-HOME SALARY
• Net salary or take-home salary is obtained after deducting income tax at source
(TDS) and other deductions as per the relevant company policy.
• Net Salary = Basic Salary + HRA + Allowances - IncomeTax - Employer's Provident
Fund - ProfessionalTax

6. IDEAL SALARY
STRUCTURE

7. Component Recommendation
Basic 40-50% of CTC
DA 5% of CTC
HRA 50% of Basic + DA if metro and 40% if non-metro
Conveyance Rs. 1,600 a month
Medical Rs. 1250 a month
LTA
No real benchmark, can even be used as a plug, but if not can
set as 10% of Basic
ESIC (Employer Contribution) 4.75% of Gross Salary
ESIC (Employee Contribution) 1.75% of Gross Salary
Provident Fund (Employer)* 12% of Basic + DA
Provident Fund (Employee) 12% of Basic + DA
Professional Tax As per statewise slabs
Labour Welfare Fund As per state wise slabs

8. Net Income IncomeTax Health and Education Cess
Up to Rs. 2,50,000 Nil Nil
Rs. 2,50,001-Rs. 5,00,000 5% of total income 4% of income tax
Rs. 5,00,001-Rs. 10,00,000
Rs. 12,500 + 20% of total income –
5 lakhs 4% of income tax
Above Rs. 10,00,000
Rs. 1,12,000 + 30% of total income
– 10 lakhs 4% of income tax
TAX SLAB:

9. EXAMPLE

10. COMPONENTS OF SALARY AMOUNT TAX TAXABLE AMOUNT
Basic Salary 480,000 Full amount is taxable 4,80,000
DA 48,000 Depends on company policy.
Mostly fully taxable.
48,000
HRA 96,000 Applicable if living in a rented
house. Minimum of three
amounts (Note 1)
52,800
Conveyance Allowance 22,200
Conveyance allowance for up
to Rs.19,200 per annum is
exempt from tax i.e.22,200-
19,200=3000
3000
Entertainment Allowance 12,000 Fully taxable. 12,000
Overtime Allowance 12,000 Fully taxable
12,000
Medical Reimbursements 15,000
Exempt to a limit of Rs 15,000
annually
0
GROSS SALARY 6,75,000 Gross Taxable Salary 6,07,200

11. HRA CALCULATION :
The minimum of the three amounts will be exempt from tax:
a. Actual HRA allowance in the salary package, that is Rs 96,000
OR
b. HRA received less 10 per cent of salary and DA, that is 43,200 (96,000 – 10% of
528,000)
OR
c. If you live in metropolitan (Delhi, Chennai, Bombay and Calcutta), 50 per cent of
salary and DA However, if you live in any other city, it is 40 per cent of salary + DA.
So, in this case it would be Rs 2,11,200 (40% of 528,000)
So HRA will be minimum of ( 96,000; 43,200; 2,11,200) which is 43,200 which will
be exempted.
So the portion that will be taxed in this example is = 96,000 – 43,200 = 52,800

12. TAX
Tax
57,103
Employee PF contribution(12% of Basic) 57,600
ProfessionalTax 2400
Total Deductions 1,17,103
Net Salary = GrossTaxable Salary –Tax =6,07,200- 1,17,103=4,90,097
Net Monthly Salary =490097/12=40,841.41
CTC- 7,32,600

13. FORM 16
• The company issues a Form 16 which contains the details about the salary earned
by the employee and the amount of tax deducted.
The taxpayer is required to submit Form 16 to file the IncomeTax returns every
financial year. It acts as the proof of his/her income and tax paid to the
government.

14. THANKYOU