Understanding Gross Salary: Does It Include Employee or Employer PF Contributions?

Hi all,

Please advise me on a simple question:

1. What is gross?
2. Does it include the PF contribution of the employee or employer?
3. Or both??

Awaiting your response.

Regards,
Sunita Sarkar 😛😛😛

Hi Sunita,

Gross Salary is the agreed/committed compensation your organisation agrees to pay on a monthly (periodic) basis against your services for that period. Gross salary includes basic, HRA, transport, and other allowances. Additionally, it includes the PF contribution of the employee only. The employer's contribution towards PF does not form a part of the gross salary.

Hi Sunita,

The components of the salary breakup may be as below, and you can prepare it to suit your needs. HRA would be 40 or 50% of basic.

Basic

HRA 40 - 50% is exempted from taxes, depending on the class of the city.

CCA - 825/- is exempted from tax.

Other Allowances

Mobile Reimbursement

Medical Reimbursement of 1250/month is exempted from tax.

Gross Per Month = Sum of all the above.

Gross Per Annum = 12*Gross/Month.

PF Contribution = 12% of Basic/Annum.

ESI Contribution = 4.75% of Gross/Annum.

Medical = The mediclaim facility provided to employees who are not covered under ESI, as the maximum ceiling for ESI is 10000/Month. Getting more than this will be covered under Mediclaim or it depends on company policy.

Ex-Gratia/Bonus = A fixed amount as a bonus.

Annual Fixed Gross Cost = Gross/Annum + Ex-gratia.

Annual Total Cost = AFGC + PF + ESIC.

Annual total cost is also called CTC.

Apart from this, food coupons, holiday packages, and furnishing items are included in their CTC.

I hope this information has helped to clarify your queries to some extent.

Regards,

Amit Seth.

Total earnings of a person in a particular month are their gross salary, in other words, without deducting any amount from their salary. This is the gross salary.

Net salary is what remains after deducting statutory as well as non-statutory deductions like canteen fees, transport charges, etc.

K. V. Selvaraj
Coimbatore

The amount that your company promises on paper is GROSS.

And

The amount that you eventually receive in your bank account is NET.

Hello Sunita,

Hope you are doing well. This is an example of what we follow in our company. Gross is not what you get in hand, and it includes the following components: Basic, DA, HRA, Conveyance Allowance, CCA, Special Allowance, LTA, Medical reimbursement, and Employee's Contribution to PF. Therefore, Bonus and employer's contribution to PF are not included in the Gross salary.

The components that are deducted from Gross to arrive at the salary in hand or Net salary are as follows: Net Salary = Gross salary - Employee's contribution to PF - Late time - (any other required deductions like ESI, Medical, etc.) and then finally to arrive at CTC: Gross Salary + Bonus paid + PF contribution of the employer.

I hope things are clear now. Have a great weekend ahead!

Cheers, Priyanka.

Hi Suneeta,

Gross salary contains your earning part. From company to company, the elements get changed. It does not have a fixed format. Following are the samples of Gross Salary:

1. Basic + DA
2. Conveyance
3. Educational Allowance
4. Medical Allowance
5. House Rent Allowance
6. Special allowance
7. Petrol Allowance
8. Lunch Allowance
Etc.

PF is not included in gross salary but is considered in CTC (Cost to Company). PF is not your monthly in-hand earning, but it is a benefit provided by the employer to the employee. At the time of leaving the company, you can withdraw the PF. It is just like deposits.

Thanks & Regards,
Amruta 😂😂😂😂😂

Please advise, can the monthly statutory bonus be added to the gross salary? If the monthly gross salary is less than the slab for PT deduction and after the addition of the statutory bonus it crosses the PT slab, is it mandatory to deduct the PT?