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Salary Calculator

What is a Salary?

Salary is the regular payment made by an employer to his or her employees in exchange for the work performed by them. It is paid at fixed intervals, generally on a monthly basis, and often expressed as an annual sum. Salaries are usually determined by comparing what other employees in similar positions are earning in the same industry and region. In many countries, the supply and demand of resources play a major role in assessing the salary - how many vacancies are there for a specific position as against the number of people in the area who could fill that position.

Understanding Basic Salary

It is a fixed sum paid to employees in exchange for the work performed by them. The basic income is derived before any reductions or increases due to overtime or bonus, allowances are made. Basic salary is a fixed part of the compensation structure of an employee and forms the core of the salary of an employee. It does not vary, unlike the other aspects of Cost to Company. The entire amount of the basic salary shall be part of the in-hand salary.

Gross Salary - Definition

Gross salary is the term used to describe all the money an employee has made working for the company in a year. It is the salary which is without any deductions like income tax, PF, medical insurance etc. Gross salary is however, inclusive of bonuses, overtime pay, holiday pay, and other differentials. Some of the components of gross salary include basic salary, house rent allowance, special allowance and conveyance allowance, among others.

Difference Between Basic Salary and Gross Salary

Basic salary is the figure agreed upon between a company, its employee, without factoring in bonus, overtime, or any kind of extra compensation. Gross salary, on the other hand, includes overtime pay and bonuses, but does not consider taxes and other deductions. Say for instance, an employee’s gross salary is Rs. 40,000 and a basic salary is Rs. 20,000. This means that the individual will receive Rs. 20,000 as fixed pay and the remaining Rs. 20,000 in allowances such as house rent allowance, conveyance, dearness allowance, etc.

Cost to Company (CTC)

Cost to company is the amount that a company spends – directly or indirectly – in hiring and sustaining the services of an employee. In other words, CTC is a term for the total salary package of an employee. It indicates the cumulative amount of expenses an employer spends on an employee during one year.

The various components of CTC are as under:

Direct Benefits
Basic Salary
Conveyance Allowance
Dearness Allowance
House Rent Allowance (HRA)
Medical Allowance
Leave Travel Allowance (LTA)
Vehicle Allowance
Telephone/Mobile Phone Allowance
Incentives or bonuses
Special Allowance
Indirect Benefits
Food Coupons/Subsidized meals
Company Leased Accommodation
Interest Free Loans
Income Tax Savings
Health and Life Insurance premiums paid by employer
Savings Contribution
Gratuity
Superannuation Benefits
Employer Provident Fund (EPF)

Net Salary

Net salary, or more commonly referred to as take-home salary, is the income that an employee actually takes home after tax, provident fund and other such deductions are subtracted from it.

Net Salary = Gross Salary (less) Income Tax (less) Public Provident Fund (less) Professional Tax

Net Salary is usually lower than gross salary. It can be equal in cases where income tax is 0 and when the salary that the employee is earning is less than the government tax slab limits.

What is the Difference Between Gross Salary and Net Salary?

Gross Salary is the figure derived after totalling all the allowances and benefits but before deducting any tax, while net salary is the amount that an employee takes home. An individual's gross salary is inclusive of benefits such as HRA, conveyance allowance, medical allowance etc. Net Salary = Gross salary - All deductions like income tax, pension, professional tax, etc. Net salary is also referred to as Take Home Salary.

Frequently Asked Questions

What is salary?

Salary is the regular payment made by an employer to his or her employees in exchange for the work performed by them. It is paid at fixed intervals, generally on a monthly basis, and often expressed as an annual sum. Salaries are determined usually by comparing what other employees in similar positions are earning in the same industry and region.

How TDS is calculated on salary?

Step 1 - Compute gross income

Step 2 - Add income from all other heads

Step 3 - Deduct loss from house property. The figure derived will be the employee’s total income on which tax is required to be deducted.

Step 4 - Assess the income tax as per the income based on slab rate along with the surcharge and cess as applicable.

Step 5 - Each month, 1/12th of the amount of tax shall be deducted.

Step 6 - Excess or deficit, if any, arising from any earlier deduction can be adjusted by increasing or decreasing the amount of subsequent deductions in the same financial year.

The income tax slab for individuals and HUF (less than 60 years old) for FY 2018-19

Income Tax SlabsTax RateHealth and Education Cess
Income up to Rs. 2,50,000No tax-
Income from Rs. 2,50,000 – Rs. 5,00,0005%4% of Income Tax
Income from Rs. 5,00,000 – Rs. 10,00,00020%4% of Income Tax
Income more than Rs. 10,00,00030%4% of Income Tax

The income tax slab for senior citizens (60 years old or more but less than 80 Years old) for FY 2018-19

Head 1Head 2Head 3
Income up to Rs. 3,00,000No tax-
Income from Rs. 3,00,000 – Rs. 5,00,0005%4% of Income Tax
Income from Rs. 5,00,000 – Rs. 10,00,00020%4% of Income Tax
Income more than Rs. 10,00,00030%4% of Income Tax

The income tax slab for senior citizens (80 years old or more) for FY 2018-19

Tax RateHealth and Education Cess
Income up to Rs. 5,00,000No tax-
Income from Rs. 5,00,000 – Rs. 10,00,00020%4% of Income Tax
Income more than Rs. 10,00,00030%4% of Income Tax

What percentage is HRA of basic salary?

HRA will be 50% of basic salary if the taxpayer is residing in a metro city and 40% of basic salary if the taxpayer is residing in a non-metro city.

What is gross salary?

Gross salary is the term used to describe all the money an employee has made working for the company. It is the salary which is without any deductions like income tax, PF, medical insurance etc. Gross salary is however, inclusive of bonuses, overtime pay, holiday pay, and other differentials. Some of the components of gross salary include Basic Salary, House rent allowance, Special Allowance and Conveyance Allowance, among others.

What is net salary?

Net salary, or more commonly referred to as take-home salary, is the income that an employee actually takes home after tax, provident fund and other such deductions are subtracted from it.

Net Salary = Gross Salary (less) Income Tax (less) Public Provident Fund (less) Professional Tax

What is cost to company?

Cost to company is the amount that a company spends – directly or indirectly – in hiring and sustaining the service of an employee. In other words, CTC is a term for the total salary package of an employee. It indicates the cumulative amount of expenses an employer spends on an employee during one year.

How is gross salary different from net salary?

Gross salary is the amount of salary after totalling all the benefits and allowances but before deducting any tax, while net salary is the amount that an employee takes home. An individual's gross salary is inclusive of benefits such as HRA, conveyance allowance, medical allowance, etc. Net Salary = Gross salary - All deductions like income tax, pension, professional tax, etc. Net salary is also referred to as Take Home Salary.

How is basic salary different from gross salary?

Basic salary is the figure agreed upon between a company its employee, without factoring in bonus, overtime, or any kind of extra compensation. Gross salary, on the other hand, includes overtime pay and bonuses, but does not consider taxes and other deductions. Say for instance, an employee’s gross salary is Rs. 40,000 and basic salary is Rs. 20,000. This means that the individual will receive Rs. 20,000 as fixed pay and the remaining Rs. 20,000 in allowances such as house rent allowance, conveyance, dearness allowance, etc.

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