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Difference Between CTC and Gross Salary

money-pdCTC vs Gross Salary

A salary is the periodic payment that an employee receives from an employer in return for the work he provides. An employee, when seeking employment, will always look towards CTC, or Cost to Company, and gross salary. The difference between CTC and gross salary, is that some components are included in one, but not in the other.

Cost to Company is the amount that an employer will spend on an employee in a particular year, whereas, gross salary is the amount an employee receives as a salary, before any deductions.
When talking of Cost to Company, it involves salary, reimbursements, contributions and tax benefits. A salary includes the basic amount, dearness allowance, house rent allowance and other allowances. The reimbursement includes bonuses, reimbursement of conveyance/telephone/medical bills, incentives, and other benefits that are given. Contributions refer to the amount that the employer contributes to the PF, gratuity, super annuation and medical insurance. Leave encashment, non-cash concessions and stock option plans are all included in the CTC. Though these are included in the CTC, these may vary from one company to another.

In regards to gross salary, it is the amount that the employer has committed to pay an employee on a monthly basis. A gross salary will not include the contributions to the PF and gratuity, among other things. For gross salaries, certain components are different for individual employees, and other components are the same for all employees.

The components of a gross salary includes basic pay, dearness allowance, house rent allowance, city compensatory allowance, and other emoluments.

Cost to Company refers to the amount that the employer is willing to spend on an employee. While the employer’s contribution is added to the Cost to Company, the employer’s contribution is not added to the gross salary.

Summary:

1. Cost to Company is the amount that an employer will spend on an employee in a particular year, whereas, gross salary is the amount an employee receives as a salary, before any deductions.

2. A gross salary will not include the contributions to the PF and gratuity, among other things.

3. The employer’s contribution is added to the Cost to Company; the employer’s contribution is not added to the gross salary.

CTC involves salary, reimbursements, contributions and tax benefits. Salary includes the basic amount, dearness allowance, house rent allowance and other allowances. On the other hand, the components of a gross salary includes basic pay, dearness allowance, house rent allowance, city compensatory allowance, and other emoluments.


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2 Comments

  1. Very neatly Explained !

    But I have one clarification on one of the pay components,
    In case of an employee traveling outside the work location companies pay a component called perdium, this component is actually not a part of gross salary then is this component a part of CTC.
    And how can an employee declare this, as in this component is variable; depends on the travel period of an employee.

    Thanks
    Sachin

  2. My Company has transferred me to a different location for which they where paying in the salary slip as Special HRA for Housing & Other exps every month (which would be revoked if i come to my Home Location) also HRA was paid differently,
    So is this special HRA paid to me is included in Gross Salary. Do reply me on my email id abhishekhmishra1@gmail.com

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