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How to Calculate Fixed Pay in CTC

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How to Calculate Fixed Pay in CTC

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As the name suggests, a fixed salary is a predetermined amount you get for the services rendered to your employer. Understanding this amount from within your CTC or total salary package helps you plan your finances & effectively negotiate your salary in the future. Usually, the fixed salary, or the fixed pay, is a collection of various components paid to an employee.

What is a fixed salary?

Fixed pay is the monthly compensation that the employer pays you, the employee, in lieu of the professional services you provide. Apart from exceptional circumstances, you are legally entitled to this amount irrespective of other influencing factors such as individual or company performance. The basic pay and any other eligible benefits, such as house rent, transportation, and dearness allowances, are all included in the fixed salary.

Impact of a fixed salary on employers & employees

In well-established companies

The fixed salary is the predominant part of a typical salary structure. It's because larger companies with a longer tenure in the industry tend to have a more balanced salary mix and stable stream of income to sustain the salary liabilities. 

For smaller companies or startups

The fixed salary may be lower than the variable components such as stock options, bonuses, and incentives. Growing companies prefer keeping their fixed costs low and are willing to dole out payments when they witness a profit boom.

For employees

A fixed salary offers a higher sense of security as you know your monthly cash inflow. It helps you optimise your budget & factors in monthly expenses, utility bills, EMI payments, etc. It also indicates how much you can start investing in tools such as recurring deposits or SIP to secure your financial future. On the other hand, a fixed salary gets provided irrespective of your performance. It may not be a sufficient motivator for high-performing individuals as they can earn higher with performance-linked incentives.

Components of a fixed salary

Basic salary

Makes up 40-50% of the overall fixed salary and influences other components such as HRA (40-50% of basic), DA (25-38% of basic), or PF (12% of basic).


The employer can choose which allowances to pay its employees. Often, the allowances offered are House rent allowance (HRA), Dearness allowance (DA), Conveyance Allowance, Medical Allowance, Special Allowance, etc.

How to calculate the fixed salary

Adding the basic salary and all the monthly allowance bits will provide your fixed salary component. It can also be done from the CTC (cost-to-company) details, although it usually depicts the annual figures. So, you will need to add the yearly basic + allowances & then divide the sum by 12 to get your monthly fixed salary.

The basic salary is the most significant part of the fixed pay. Commonly, it's set at 40% to 50% of your CTC. Since the entire amount is taxable, a higher basic means a bigger tax liability.

The basic salary calculation from CTC can be done by multiplying the percentage. For example, if your employer offers 40% of a ₹10 Lakh CTC as the basic pay, it translates to 10,00,000 x 0.40 = ₹4 Lakh per annum or ₹33,333 per month.


Another way to calculate the basic salary structure is by adding all the allowances and deductions (as mentioned in the CTC). This sum, then, should be subtracted from the overall CTC amount. The result will be your basic pay. Once you’ve figured all of this out, we know a great place to park your salary. Fi Money, and its RBI-licensed partner Federal Bank, provide a salary account with many benefits. For starters, you get 10% of your salary as Fi-Coins — every month. Plus 5,000 Fi-Coins as a joining bonus. You can redeem these Fi-Coins on an exclusive catalogue of rewards. Other perks include no minimum balance, a free VISA Platinum debit card with zero forex charges, priority customer service & more. That's not all! Fi will also help you manage/grow your money with features like Connected Accounts, Analyser, Goal-based saving, SIPs & automatic payments.

Frequently Asked Questions

Is CTC the same as fixed pay?

No, the CTC is the larger umbrella that your pay falls under. CTC (cost to the company) is the company's total expense for your employment. It includes all the amounts paid to you and the deductions made on your behalf and deposited to the regulatory institution, such as taxes paid to the Income Tax department or the contributions made to the Employee Provident Fund Organisation (EPFO).

What is fixed plus variable CTC?
CTC represents the company's cost and encompasses all components such as basic pay, direct benefits, indirect perks, variables such as bonuses, incentives, and deductions such as taxes and retirals. CTC is used to express the entire cost incurred by the company for your service. Fixed salary refers to those salary heads that are predetermined by the employer and paid out each month. Typically, these are basic pay, HRA, and some other allowances.

The employer sets the variable part of the salary and can influence factors such as individual performance, company profits, the nature of your role, etc. Variable salary includes sales or performance-linked incentives, commissions, stock options, retention bonuses, etc.

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