LPA full form

LPA meaning- Lakhs Per Annum.

It is a commonly used term in salary discussions in India and represents the annual salary offered to an employee. LPA is usually mentioned while hiring, during appraisals, and in offer letters.

In most cases, LPA refers to the annual CTC (Cost to Company), not the actual amount an employee receives in hand.

What is LPA in salary?

LPA in salary means the total annual compensation an employer spends on an employee in one year. This includes both direct salary components and indirect benefits.

Companies prefer quoting salary in LPA instead of monthly pay because:

• It gives a yearly cost overview
• It helps in salary benchmarking
• It allows easy comparison across roles and experience levels
• It includes benefits beyond cash salary

LPA meaning in simple terms

Example:

• 5 LPA = ₹5,00,000 per year
  
• 10 LPA = ₹10,00,000 per year

However, this amount is not fully received as take-home salary, as deductions apply.

What is included in LPA?

LPA generally includes the following components:

• Basic salary – fixed component of salary
  
• House Rent Allowance (HRA) – if applicable
  
• Special allowances – travel, internet, or other allowances
  
• Bonuses – annual or performance-based bonuses
  
• Employer’s contribution to PF
  
• Gratuity – included as part of CTC in many companies
  
• Group Insurance premiums – Group health insurance, group term life insurance if paid by employer
  

The exact breakup may vary from company to company.

Difference between LPA and in-hand salary

LPA and in-hand salary are not the same.

• LPA is the total annual cost to the company
  
• In-hand salary is the amount credited to your bank account every month

Why in-hand salary is lower than LPA:

• Income tax deductions
  
• Employee PF contribution
  
• Professional tax
  
• Other statutory deductions

As a result, the monthly take-home salary is always less than the LPA divided by 12.

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How to calculate LPA to monthly salary?

Simple formula: LPA ÷ 12 = Gross monthly salary

Example:

• 6 LPA ÷ 12 = ₹50,000 (gross per month)

However, actual in-hand salary will be lower after deductions like tax and PF.

Is LPA the same as CTC?

In most cases, LPA and CTC are the same, but not always.

• If all benefits and contributions are included, LPA = CTC
  
• If incentives or reimbursements are excluded, LPA may differ from actual earnings

It is always advisable to ask for a detailed salary breakup.

5 LPA salary breakup chart

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6 LPA salary breakup chart

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10 LPA salary breakup chart

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Why does HR use LPA as a salary metric?

HR teams use LPA because:

• It helps in standardized compensation planning
  
• It allows fair comparison across employees
  
• It simplifies annual budgeting
  
• It aligns with industry-wide salary benchmarks