Gross Salary vs Net Salary — What’s the Difference?
Have you ever looked at your job offer letter and thought, “Wait, why is my take-home pay so much less than what’s written here?” That’s where the difference between gross salary and net salary comes in. Let’s break it down in plain, simple English so you’ll never get confused again.
What Is Gross Salary?
In simple terms, gross salary is the total amount your company pays you before any deductions. Think of it as your full paycheck on paper, not what actually lands in your bank account.
- Basic pay
- House Rent Allowance (HRA)
- Dearness Allowance (DA)
- Conveyance or travel allowance
- Medical allowance
- Bonus or incentives
- Any other company benefits
Example: Suppose your offer letter says your salary is ₹6,00,000 per year. That ₹6 lakh is your gross salary. But you won’t receive all ₹6 lakh in your hand — because certain deductions come into play.
What Is Net Salary?
Net salary (also known as in-hand salary or take-home pay) is the amount you actually receive after all deductions.
Net Salary = Gross Salary – All Deductions
- Income tax (TDS)
- Employee Provident Fund (EPF)
- Professional tax
- Health insurance or other company-specific deductions
Gross Salary vs Net Salary — Key Differences
| Aspect | Gross Salary | Net Salary |
|---|---|---|
| Meaning | Total salary before deductions | Salary received after all deductions |
| Includes | Basic pay, HRA, DA, allowances, bonuses | Final amount after tax, PF, and other cuts |
| Visible on | Offer letter or CTC | Payslip or bank account |
| Also called | CTC or total pay | Take-home pay or in-hand salary |
Imagine your gross salary is like a whole pizza. Before you eat it, a few slices (like taxes and PF) are taken away. What’s left — the remaining slices — is your net salary.
How to Calculate Gross and Net Salary
1. Finding Gross Salary
Gross Salary = CTC – Employer Contributions (like PF, Gratuity, Insurance)
2. Finding Net Salary
Net Salary = Gross Salary – (Taxes + PF + Professional Tax + Other Deductions)
| Component | Amount (₹/month) |
|---|---|
| Gross Salary | 50,000 |
| PF (Employee Share) | 2,400 |
| Professional Tax | 200 |
| Income Tax (TDS) | 1,500 |
| Net Salary | 45,900 |
Understanding CTC (Cost to Company)
CTC is the total cost a company spends on you. It includes both what you get and what the company pays on your behalf.
CTC > Gross Salary > Net Salary
Common Deductions That Reduce Your Net Salary
- Provident Fund (PF) – 12% of your basic pay.
- Professional Tax – ₹200–₹300 per month (varies by state).
- TDS – Income tax deducted as per your tax slab.
- Health/Life Insurance – If company provides coverage.
How to Increase Your Net Salary
- Use tax-saving investments (ELSS, PPF, etc.)
- Claim reimbursements like travel or internet bills
- Track your payslip for errors
- Consider the new tax regime if it benefits you
Example: Gross vs Net Salary Calculation
| Component | Amount (₹/month) |
|---|---|
| Basic Salary | 25,000 |
| HRA | 10,000 |
| Travel Allowance | 2,000 |
| Medical Allowance | 1,000 |
| Bonus | 2,000 |
| Gross Salary | 40,000 |
| PF Deduction | 3,000 |
| TDS | 1,000 |
| Professional Tax | 200 |
| Net Salary | 35,800 |
Try Our Free Salary-to-Tax Calculator 🧮
Want to see your exact take-home salary after taxes and deductions?
Try CalculatorFAQs — Gross Salary vs Net Salary
1. Is gross salary the same as CTC?
No. CTC is the total cost a company spends on you, including employer contributions and benefits. Gross salary is what you earn before deductions but after removing employer contributions.
2. Why is my take-home pay less than my gross salary?
Because deductions like income tax, PF, and professional tax are subtracted from your gross salary before you receive your net (in-hand) amount.
3. How can I calculate my net salary easily?
Use this formula or just use the calculator.
Net Salary = Gross Salary – (PF + Tax + Professional Tax + Other Deductions)
Final Thoughts
Understanding the difference between gross salary and net salary helps you make smarter financial decisions. Before accepting any job offer, always ask for the net take-home pay — that’s the money that truly matters.
“Gross is what you earn, Net is what you take home.”