Receiving a new job with a high salary and an office often brings joy to young people. However, sometimes, while being happy with a good offer and signing a contract, people do not consider the consequences that appear at the beginning of each month. When the package is 10 lakhs, but only 60 thousand arrives in the account, it can be shocking. Many employees do not know what their basic salary is, how much is withheld for taxes, or what the pension fund (PF) rules are.
To understand this situation, it is necessary to grasp what CTC means. CTC is the total amount the company spends on an employee over the year, not their monthly income. If the CTC is 10 lakhs, dividing it by 12 does not mean the salary will be 83.33 rupees.
Various components are deducted from the total package: 45,000 rupees for the company's pension fund (PF), 24,000 rupees for gratuity, 15,000 rupees for insurance premium, and 100,000 rupees for the variable part of the payment. After these deductions, the fixed gross salary remains around 8 lakhs. Then, after deducting the employee's PF and Income Tax (TDS), the expected monthly take-home amount is only between 60,000 and 63,000 rupees.
The issue of PF often causes confusion. There are two ways to calculate PF. Firstly, the calculation is based on a basic salary of 15,000 rupees according to EPFO rules. In this case, 1,800 rupees (12%) is deducted monthly from the employee's salary for PF, which increases the take-home amount. Secondly, if the basic salary is 40,000 rupees, and the company contributes 12% of the entire basic amount to PF, then 4,800 rupees will be deducted monthly from the salary. The company will also contribute the same amount. Although this reduces the current salary, a larger accumulation in PF ensures greater long-term savings.