Cost to Company (CTC)
Definition
The total annual cost an employer bears for an employee in India, including salary, allowances, employer contributions and benefits. It is larger than take-home pay because it includes costs the employee never receives in cash.
Why it matters
CTC is often quoted in job offers but can overstate what reaches an employee's bank account. Understanding the split between fixed pay, variable pay and employer-side costs avoids surprises.
Related Terms in Payroll
Dearness Allowance (DA)
A cost-of-living adjustment paid to employees, chiefly in the Indian public sector, calculated as a percentage of basic pay and revised periodically to offset inflation.
Leave Travel Allowance (LTA)
An allowance Indian employers pay to cover an employee's travel costs within the country, which can be exempt from tax subject to conditions and limits under the old tax regime.
Form 12BB
A declaration an Indian employee gives their employer of the deductions and allowances they intend to claim — such as HRA, LTA and investments — so the employer can compute TDS on salary correctly.
Full and Final Settlement
The process of settling all dues when an employee leaves — unpaid salary, leave encashment, gratuity and any recoveries — in a single closing calculation. It clears both parties' outstanding obligations.
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