Lesson content
Scroll through numbered sections or jump via the outline.
What you'll take away
- Cost to Company = Gross salary + employer PF + gratuity accrual + insurance + other benefits.
CTC anatomy in India
Cost to Company = Gross salary + employer PF + gratuity accrual + insurance + other benefits.
Employees care about in-hand (net pay after PF, PT, TDS).
Founders must model true hiring cost, not headline CTC.
Typical components
Basic salary: drives PF and gratuity calculations — usually 40–50% of gross.
HRA: tax exemption if rent paid (metro rules).
Special allowance: flexible bucket.
LTA, medical, food coupons: tax-efficient perks if structured correctly.
Tax regimes
New vs old tax regime choice per employee — payroll software should support both.
Standard deduction and 80C/80D proofs in old regime.
Founders on payroll: plan advance tax if salary is low and other income exists.
Compliance on payroll
Professional tax by state (e.g. Karnataka, Maharashtra slabs).
TDS under 192 monthly.
Payslips with breakup mandatory for morale and audits.
Offer letter must match
CTC breakup in offer letter = fewer disputes at joining.
Clarify probation, notice period, and variable pay conditions.