The Salary Breakdown

Note: The below information is just an example, the numbers may vary with different firms.

Companies attract high skilled freshers with good CTC and trap most of the cream layered batch from the college.

CTC means Cost To Company. Now, let's understand what is included in CTC.

CTC includes both direct and indirect benefits.

>Direct benefits = Basic salary + Allowances + Variable pay

>Indirect benefits = Coupons + meals + Transport + Income tax savings option

— — — — *** — — — —

Let’s consider an example of CTC = 36LPA by a company X.

In general, a student expects around 3 Lacs/month but the reality is different.

36 lacs (CTC)=10 Lacs (base salary) + 20 Lacs (RSU’s) + 3 Lacs (Variable) + 3 Lacs (Joining bonus)

— — — — RSU’s — — — —

Restricted Stock Unit= 20Lacs is divided into “n” years. Let’s say 4 here.

So, here you will be able to receive an amount of 1.7 Lacs by selling an RSU worth of 2 Lakhs in the first year, 3.4 Lacs in the second year and so on…

Note: You will receive each instalment of RSU stock only if you work for that particular year completely. If you plan to leave the company after 2 years for your masters or PhD or switching the company then you won't receive the year 3 & year 4 amount.

Few companies are not listed under the IPO so the employee has to wait until the company is listed under IPO in order to sell those RSU’s. The time period cannot be estimated.

— — — — Variable pay — — — —

Variable includes Allowances and performance-based.

Allowances = House Rent + Medical + Convenience (Transportation) + Leave Travel (Trips)

Most of the people doesn’t utilize the whole allowances. Let's say what if you don’t require medical allowance or Leave travel allowance. So here the 3 Lpa variable pay is not completely utilized.

— — — — Joining bonus — — — —

Joining bonus is a one-time payment, here we should not include this in the in-hand salary per year column.

— — — — Income Tax — — — —

Now, let’s deduct the income tax from the salary.

Here the salary is 10 LPA, so the tax is ~20%.

The total amount is now 8 LPA

The expected final amount is 300000/month but in reality, we receive 66,000/month :(

Before and after, realising the salary structure of an employee

Note: Few companies offer less CTC but a high in-hand salary, students should be very careful in choosing companies.