Difference between Gross Salary and Net Salary
Gross Salary is the amount of salary after adding all benefits and allowances but before deducting any tax. It includes benefits like Free Meal, Medical Insurance and allowances like HRA, Conveyance Allowance, Dearness Allowance, Medical Allowance, Special Allowance etc.
Net Salary is the amount that employee takes home. It equals to gross salary minus all tax-exempt allowances and deductions like HRA, LTA, Conveyance, Standard Deduction, Professional Tax, Entertainment Allowance.
Let’s take an example to understand the difference between Gross salary and Net salary:
|House Rent Allowance (HRA)||66,000|
|Net Salary/ Take Home Salary||7,17,800|
|Net Monthly Salary||59,817|
As per regular practice, you will be able to find both gross salary and net salary also in your salary slip. By understanding the difference between Gross salary and Net salary:
- You can plan your investments. Which can help you utilise all eligible deductions and reduce the tax liability. Hence, it will reduce your TDS liability and increase your Net Salary.
- Get an idea about how much of your salary goes into mandatory savings like EPF, ESI every year.
- You can also evaluate job offers to determine which one is more favourable on the basis of Gross salary and Net Salary.
You can also find both the components in your Form 16. Form 16 is proof of income of employee and tax paid to the government. Gross Salary is nothing but a total of Line 1 in Form 16. And Net Salary is in Line 6 as Income Chargeable under the head “Salaries”.