What is the Difference Between CTC and Gross Salary in India?

With a population of over 1.3 billion, a rapidly growing workforce, and a strong economic growth rate, India is fast becoming a popular country for organizations' international expansions. When coupled with the large number of NRIs (nonresident Indians) returning to work in India from countries such as U.S., UK, and Australia, India offers a growing, skilled work force with experience working in an international environment.

CTC Vs. Gross Salary in India

One would be hard-pressed to hear gross salaries or base salaries discussed openly in India; it is purely CTC (cost to company), and in its simplest form is ‘what it costs the company from a salary and contribution point of view to hire this employee.” As there is no real employer burden other than some small administration fees associated with the Provident Fund, CTC is typically the figure quoted when discussing current salaries or potential salary offers/increases. The CTC is broken down into a number of allowances that enables the employee to benefit from tax efficiencies either on each pay day, or at the end of the financial year.

Electronic Duty Rates

The import of electronics can levy a duty of up to 40% and sometimes requires additional paperwork and licenses for the item to be released from customs. This becomes prevalent when international companies send their employees laptops, tablets desktops, or any other form of electronics from outside of India.

Health Care Considerations

Offering heath care can be a cost-effective way to secure a candidate, as it is significantly cheaper than most countries’ and offers great local coverage. Further, it is customary to include the employee’s parents in the coverage.

Tax on Global Income

Indian residents are liable for tax on their global income, from any source. Although it is the Indian residents’ responsibility to report their income, the numerous Double Tax Avoidance Agreements (DTAA’s) in place means that the Indian authorities have greater powers to track down global income and seek out the companies paying the resident. This can create a permanent establishment risk for global companies.

FAQs

What is CTC?

CTC stands for Cost to Company, and is calculated by taking the sum total of Direct Benefits, Indirect Benefits, and Savings Contributions. This refers to the yearly expenditure a company spends on an employee through its salary package.

What is the difference between gross salary and CTC?

While CTC is what a company spends on an employee on a yearly basis, gross salary is what an employee receives before deductions.

Expand into India with an Experienced Global Expansion Partner

India offers globally expanding companies many opportunities in a number of sectors. But breaking into the Indian market can be challenging: CTC and salary, health coverage, cultural considerations; each plays a vital part in ensuring you’re expanding compliantly.

Pebl (previously Velocity Global) has helped hundreds of organizations expand into over 185 countries—and we can do the same for your Indian expansion. Whether you’re sending one employee or planning to hire a brand-new team, our Employer of Record solution can assist with establishing your presence in India, no entity required. Ready to get started? We’re ready when you are.