Understand your CTC

 Do you know what lies behind those impressive CTC packages? Let me reveal the truth about inflated salaries and actual take-home pay.

To begin with, CTC stands for "Cost to Company," which includes gross salary, employer PF, and ESIC contributions. The two main components of CTC are various bonuses (joining, annual, and performance) and allowances, as well as RSUs and taxation.

Joining bonuses are a one-time thing, while annual bonuses depend on the company, and performance bonuses on the employee's performance.

RSUs or Restricted Stock Units are granted by multinational companies listed on the stock market, while ESOPs are given by companies not listed. ESOPs can be cashed in only after an extended period of service.

Allowances are financial benefits provided to employees to cover expenses such as transport, travel, entertainment, housing, medical, and others.

Taxation has a significant impact on employees' take-home pay. If you package is more than 20 Lakhs then you may fall under the 30% tax bracket.

Thus, In-hand salary is the net salary credited to your bank account after tax and other deductions, which can be 30-50% of the CTC.

To calculate net salary and CTC, use this salary structure as an example. Suppose a company offers a CTC of around 50 lakhs, in which 40% represents 20 lakhs in RSUs, 2 lakhs in joining bonus, and the rest in gross salary (around 28 lakhs). As a result, the amount credited to your bank account will be approximately 1.5-1.8 lakh on a 50-60 lakhs package.