What is net salary?

Net or take-home salary is the money an employee receives after all deductions from their gross salary. These deductions typically include income tax, employee contribution to provident fund, professional tax, and other statutory deductions.

Formula of net salary

Net salary = Gross Salary – Deductions

where:

  • Gross salary is the total amount of salary an employee earns before deductions
  • Deductions are the amount of money that is taken out of an employee’s gross salary before they receive their take home salary.

Example 

Assume the following:

  • Gross salary: Rs. 100,000
  • Income tax bracket: 20%
  • Employee’s contribution to provident fund (PF): 12%
  • Professional tax: Rs. 2,000

How to calculate net salary?

Take home salary = Gross Salary – Deductions

= Rs. 100,000 – (20% * Rs. 100,000) – Rs. 12,000 – Rs. 2,000

= Rs. 76,000

Therefore, the take home pay in this case is Rs. 76,000.

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