Your CTC Is Not Your Taxable Income. Surprised?
If you thought you pay tax based on what your CTC is, then you wouldn’t be the only one, but you’d be kind of wrong.
You see, the income tax department speaks a different language altogether. They couldn’t care less what your CTC is. What they do care about is something they call “Income from salary”. It’s one of the five ways the tax department identifies income sources.
If all your money comes from the salary transfer hitting your bank account then income from salary is the only thing you should bother about from a tax angle.
CTC and income from salary – What’s the difference?
Your CTC or cost to the company is what the company considers as its total money spent on you directly. For example, the company’s contribution to EPF is part of your CTC, along with your contribution. This means that there are elements which are part of your CTC but not considered from a tax perspective.
Your CTC generally includes:
Your taxable income doesn’t include the following:
In addition, if you pay rent for the house you live in and also have HRA in your salary, then the minimum of following 3 is reduced from your salary:
These numbers add up and your taxable salary may be significantly less than your CTC.