Example of CTC Calculation
Example:
Suppose an employee has a basic salary of ₹40,000 per month, and receives the following allowances and incentives,
- Dearness Allowance (DA) amounts to ₹4,000
- House Rent Allowance (HRA) is ₹8,000
- Conveyance Allowance is ₹1,000
- Entertainment Allowance is ₹1,000
- Overtime Allowance is ₹1,000
- Medical Reimbursements are ₹1,250
Calculate the required CTC.
Solution:
The employee’s gross salary is calculated as follows:
Gross Salary = Basic Salary + DA + HRA + Conveyance Allowance + Entertainment Allowance + Overtime Allowance + Medical Reimbursements
Gross Salary = ₹40,000 + ₹4,000 +₹8,000 + ₹1,000 + ₹1,000 + ₹1,000 + ₹1,250
Gross Salary = ₹56,250 Per Month.
Now, assuming the employer also provides the following additional benefits to the employee,
- Medical Insurance is ₹2,000 per year.
- The Provident Fund, which is 12% of the Basic Salary (i.e., 12% of ₹40,000 = ₹4,800 per month).
- A Laptop is provided at a one-time expense of ₹50,000.
- The gratuity is ₹2,000 per month.
So, the CTC will be the Sum of All Benefits and Salary
Sum of Benefits + Gross Salary Per Year = ₹2,000 + (₹4,800 x 12 months) + ₹50,000 + (₹2,000 x 12 months) + (₹56,250 x 12 months)
Cost to Company (CTC) = ₹8,08,600.
Contact Us