Difference Between Gross Salary and Net Salary
The following is the difference between Gross Salary and Net Salary:
Parameters of salary |
Gross Salary |
Net Salary |
---|---|---|
Definition |
Amount that an employee can get before any kind of deductions of any tax. |
Take home salary, meanings the amount an employee is able to get after all kind of deductions. |
Components |
House Rent Allowance, Conveyance Allowance, and Medical Allowance etc. |
Income Tax, Professional Tax, Provident Fund, Pension, etc. |
Amount |
Maximum amount of the salary that includes all taxes. |
It is always a lower amount than gross pay. |
Mode of Calculation |
Calculated by adding all payments. |
Calculated by subtracting penalties and compulsory taxes. |
Formula to Calculate |
Gross Salary = Basic Salary + House Rent Allowances + Other Allowances |
Net Salary = Gross Salary – Applicable Deductions |
Benefits |
Through gross income, individuals get holiday pay, incentives, etc. |
In the case of net income, individuals need not pay tax at different levels. |
Difference between Net Salary and Gross Salary
Net Salary and Gross Salary: Gross salary is the total amount received by an employee without any tax deductions whereas Net salary is the total amount of money that an individual takes home after all kinds of deductions have been taken out. You can calculate it by the following formula given by Net Salary = Gross Salary – All kinds of deductions such as income tax, pension, etc. You can say “Net salary is the take-home salary”.
A salaried individual must have come across gross Pay and net pay terms. For new joiners Managing payroll becomes an overwhelming task. So having an idea about these terms helps in negotiating as well as avoiding HR mistakes that startups generally make.
In this article, we have covered Net pay and gross pay, different types of salary, payroll, and income, and formulas for calculating your in-hand salary, and more.