What is net salary?

Posted on 10th Aug 2018 | 1148 views

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Gross salary

To understand Net salary One should know about Meaning of gross salary is that the amount the employee earned in the given timeframe which includes basic pay and the allowances and it is also known it is the salary of the employee before any deduction .gross salary is mentioned when the employer is hiring the individual for the employment following are the different components that are included in the gross salary calculation

Gross salary

Gross salary is = Basic pay+ HRA (House Rent Allowance) + DA (Dearness Allowance) + MA (monthly allowances)

Basic Salary: employee basic salary will not vary and remains a constant always. The entire payment of basic salary will be part of employee in-hand salary.

Allowances: This is the amount received by a person paid by your employer, in addition to meeting certain requirements, such as benefit, housing allowance, leave subsidy, food allowance, transportation, child support, city allowance, etc. The allowance can be totally taxable, partly or not taxable

Allowances include

● House Rent Allowance (HRA): HRA is 10% in hand salary provided for accommodation of the employee

● Dearness Allowance (DA): to mitigate inflation problems Dearness Allowances are issued by the employer

● Transportation allowance It is the expenses of the travel home to work and it is exempt income tax income.

● Medical allowance for health care of employee

● Performance Bonus

● Leave allowances medical and healthcare services,

● incentives

● special allowances

Net salary

Net salary is the amount employee earned including gross salary and allowances and excluding contributions often net salary is referred to as the take-home salary of the employee. To put simply gross salary after deductions such as EPF and ESI and gratuity is called the Net salary. Gross and net salaries are relatable to each other net salary comes after calculation of gross salary and deductions.

Net salary=Gross salary - Income tax - Employee contributions

Contributions are made by the employee on monthly basis to avail benefits from certain schemes and pay taxes such type taxes are:

● Income tax

● Provident fund contribution

● Medical insurance ESI contribution

● Professional tax

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