What is the full form of CTC:

CTC represents Cost to Company.

Cost to Company is the salary which a company gives to its employee for a year. There is a misconception about CTC. It is mostly understood that the CTC is the amount which an employee will receive in hand. Whereas, it is actually the total amount a company has to spend in a year for hiring an employee. It is not the actual salary of the employee.

It has many components or facilities which an employer provides for getting the services in a particular time period from the employee. One thing which is very important for all the employees is they should negotiate properly while starting their job. One should negotiate and try to get an increase in the direct benefit part of the CTC.

The in hand salary can be increased by planning our tax properly. If a person invests an amount of Rs. 1.5 lakh in PPF or Equity linked saving scheme, then a lot of tax can be saved. This tax saving method will only increase the in hand salary and not the CTC amount.

There are multiple components in the salary. By asking for adjustments in few of the components, the in hand salary amount can be increased. The components are: Basic salary, allowances, contribution to Provident fund, reimbursement, transport facility, health insurance, rent of the office space, subsidized meals, life insurance, perquisites. There are different allowances given like house rent allowance, or leave travel allowance, city compensation allowance, dearness allowance etc.

CTC = Benefits (Direct + Indirect) + Savings contribution

CTC = Direct benefits + indirect benefits + saving contributions