Gross vs Net Salary
Gross salary is the total amount an employee earns before any deductions, including basic pay, HRA, dearness allowance, special allowance, and other allowances, but excluding employer-side contributions like employer PF and gratuity. Net salary, also called take-home salary, is what remains after subtracting deductions such as employee PF, professional tax, TDS, and ESI.
Understanding this distinction matters because job offers and payslips often quote gross figures, while the actual amount credited to an employee's bank account is the net salary. The gap between gross and net widens as tax slabs, PF contributions, and other statutory deductions increase.
Key points
- ✓ Gross salary = basic + HRA + DA + special allowance + other taxable allowances
- ✓ Net salary = gross salary minus employee PF, professional tax, TDS, and ESI (if applicable)
- ✓ Gross salary does not include employer contributions to PF, ESI, or gratuity
- ✓ Net salary is the amount actually credited to the employee's bank account
- ✓ Salary slips display both figures separately for transparency
Example
If an employee's gross salary is ₹60,000 per month, and deductions include ₹1,800 employee PF (12% of ₹15,000 basic), ₹200 professional tax, and ₹3,000 TDS, the net take-home salary would be ₹55,000.
Frequently asked questions
Which is higher, gross or net salary?
Does gross salary include bonus?
Why do payslips show both gross and net salary?
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