What Is Net Salary | Difference Between Net Salary & Gross Salary | Net Salary Calculator | Components Of Net Salary
Before applying for any type of job you must have proper information related to the salary that you will be provided and then only you will be able to fill out the application form because you have a perfect idea regarding the payment that you will be getting on your payday. You can easily check out the details related to the question of what is net salary from the article provided below and we will also share with you all the details related to the Difference Between Net & Gross Salary. We will also share with you all the step-by-step procedures through which you will be able to calculate the Net Salary.
What is Net Salary?
It is the amount which is taken by the employees to their house and the employees must have proper information related to the net salary before applying for the job because this is an amount that you will be taking home apart from the amount which is written on the paper because it will include all of the deductions related to tax and other specifications also. If you want to calculate It then you must have proper information related to the gross salary and you must also have information related to the deductions that your employer will make on your gross amount. Make sure that you have to deduce your tax rates in order to calculate the net amount that will be credited to your account.
Calculation Of Net Salary
You can easily calculate your net salary by taking into concentration the following formula:-
- Net Salary = Gross Salary – Professional Tax – Public Provident Fund – Income Tax
Difference Between Net & Gross Salary
The gross salary is the amount of the salary after adding all of the benefits and the allowances but before deducting any text however, the It is the amount that an employee takes home. Gross salary will include various benefits including convenience allowance and other allowances provided by the organization to the employees however It is the gross salary minus all of the deductions and the money that the employees will be taking. The gross salary will have the maximum amount of the salary with all of the taxes and the next salary is less than the gross salary after deducting all of the taxes.
The employees will have to pay the following tax as per their income from the details provided below:-
- Up to Rs.2.5 lakh- No income tax needs to be paid
- From Rs.2,50,001 to Rs.5,00,000- 5% of the total income that is more than Rs.2.5 lakh + 4% cess
- From Rs.5,00,001 to Rs.10,00,000- 20% of the total income that is more than Rs.5 lakh + Rs.12,500 + 4% cess
- Income of above Rs.10 lakh- 30% of the total income that is more than Rs.10 lakh + Rs.1,12,500 + 4% cess
Components Of Net Salary
The following components will be included in the net salary:-
- Basic salary: This is the fixed amount paid directly to employees that does not include incentives, bonuses, benefits or any other compensation from employers.
- Gratuity: Gratuity is a part of the salary paid by the employer as a token of gratitude for the services of the employee in the company. Gratuity is paid to an employee on retirement or when the employee leaves the company. However, Section 10(10) of the Income Tax Act states that gratuity is only payable only when an employee finishes five years of work at the company. The gratuity is taxable as “income from salary”.
- HRA or house rent allowance: HRA, or house rent allowance, is a salary component paid for covering the housing expenses of employees. Both salaried and self-employed individuals come under the purview of HRA.
- Salary arrears: Salary arrears is the outstanding amount paid to an employee as a result of a salary hike. For example, if you got a salary hike in January, but the hike was made applicable from July, then you are eligible to receive arrears for the last six months of the same year.
- Perquisites: Perquisites are fringe benefits paid to employees over and above the salary they receive.
- Pension: Pension is a specific amount paid regularly to employees after retirement from a job either by the employer or the government, in the case of government sector employees.
FAQs For Net Salary
It is the salary that is provided to the employees at the end of the month after all of the deductions.
Tax and other details such as pension and provident fund amount will be deducted from your gross salary to make your net salary.
Sometimes employees are provided bonuses on the type of work that they have done and this will be included in the net salary.
Net Salary = Gross Salary – Professional Tax – Public Provident Fund – Income Tax