Net salary is the take home salary of the emolyee while gross salary is the figure before making statutory or other deductions.
gross salary is basic+ HRA+ trnasport+ other allowance.
Gross salary minus pf contribution, ESI contribution, professional tax contribution etc. (as per applicability ) becomes net salary.
Hope its clear...
do revert back for further querries...
Gross Salary is the agreed/committed compensation your Organisation agrees to pay on a monthly(periodic) basis aginst your services for that period.
Net Salary is gross salary less the deductions which are made on account of statutory compliances(like PF, ESI, Income Tax, Professional Tax) and other dues (Like Loans and Advances taken) which you owe to the Company and Legal dues if any. It is something you get in hand and commonly refer to as Take Home Pay.
Your Income Tax is based on the Gross Pay.
While CTC or Cost to Company is equal to Gross pay + Benefits, Perks and Prequisites i.e., the total Cost a Company incurs in employing the person.
Just a small input from me about this.
Also, as per my understanding, Gross Salary is the total salary received on MONTHLY BASIS. This excludes the annual components like LTA, bonus etc. CTC is Gross Pay + annual components + perks/benefits/perquisites, whether in cash or kind. Net pay is the take-home pay, after all deductions.
However, some people refer to Gross pay as the total of only the CASH components. Non-cash components like driver, sweeper, company accomodation etc which the employee does not pay for are excluded. These are a part of CTC though.
Let me explain with an example -
Let us say the employee earns the following per month:
Basic Salary - INR 10000
House Rent Allowance - INR 5000
Conveyance Allowance - INR 1000
Magazine Allowance - INR 500
Education Allowance - INR 250
Then, GROSS SALARY - INR 16750
Provident Fund - INR 1200
Income Tax - INR 750
Profession Tax - INR 130
Loan Deduction - INR 750
Total Deductions - INR 2830
Then, NETT SALARY - INR 13920
His Leave Travel Allowance - INR 10000 per annum
Medical Reimburement - INR 10000 per annum
Premium for mediclaim - INR 1500 per annum
PF- Management Contribn-INR 16332 per annum
Then, CTC (Cost to Co.) - INR 2,38,832 per annum.
CTC = Monthly Gross Salary X 12 + Annual benefits (INR 37832)
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