CTC vs in-hand salary: Here’s how to read components of your pay slip. A step-by-step guide | Mint

CTC vs in-hand salary: Are you familiar with your pay scale? Why does take-home pay differ from cost to company (CTC)? Why do you receive less than what is depicted on the poster? Understanding the elements that comprise your earnings, such as your gross income, Cost to Company (CTC), and take-home pay, is just as important as understanding the amount on your paycheck. Whether you are negotiating your salary or managing your finances, understanding the details of your salary can significantly impact your financial health.

Components of salary slip

Basic salary

Basic salary is a core part of earnings and is typically the fixed amount paid to an employee. It forms the basis for determining other benefits, including Provident Fund (PF) contributions and House Rent Allowance (HRA).

House rent allowance (HRA)

The HRA is a tax-free benefit that firms offer employees to help with a portion of their rent. Depending on the workplace and corporate regulation, it usually ranges from 40% to 50% of the base pay. HRA is largely tax-exempt if an employee pays rent; nevertheless, restrictions and requirements are attached to this exemption.

Leave travel allowance (LTA)

The LTA covers your and your family’s domestic travel costs, including your tickets. With the proper travel documentation, it can be claimed twice in four years (for example, 2022–2025). Although the stipend is tax-exempt, there are restrictions, like providing travel receipts and only paying for domestic travel. LTA can assist in lowering your taxable income.

Special allowance

Fully taxable, often performance-linked, aimed to motivate employees based on individual/ company performance.

Mobile and internet allowance

This includes internet and phone costs associated with work. If the bills are in your name and were incurred for official purposes, they are tax-exempt.

Food allowance

Employers provide this allowance to cover employees’ meal expenses during work hours. It is often offered as part of the overall compensation package.

Conveyance Allowance

This covers commuting expenses between an employee’s home and workplace

Professional Tax

A state-specific tax that varies depending on your location.

Employee Provident Fund (EPF)

Retirement savings scheme. Both employee and employer contribute 12%.

Tax deducted at source (TDS)

Tax deducted from salary based on income slab.

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