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Net Salary: Definition, Calculation, and Formula Guide

What Is Net Salary?

How Is Net Salary Different from Gross Salary?

Here, we have shared the comparison between these two; please check the same below.

Net Salary

Gross Salary

It is the final payment made after deductions for EPF, ESIC, Professional Tax, Income Tax or Tax Deducted at Source and others.

It is an amount paid to a person by an employer before making any deductions.

Net pay is lower than gross pay.

Gross pay is the sum of all benefits and allowances before any deduction.

How to Calculate Net Salary?

To know about net salary, it is important to know how to calculate. Here, we have shared one example for better understanding.

Example -

Arpit works at an EdTech firm. His gross salary yearly is ₹3,50,000. So, what is his net payment? Check the calculation below.

 

Gross salary is -

Salary Components

Value

Basic Salary

₹30,000

HRA

₹1,20,000

LTA

₹60,000

Special Allowance

₹1,40,000

So, the Total (A) = ₹3,50,000 (Sum of all the components)

Deductions are-

Deduction Components

Value

Employee Provident Fund

₹21,600

Profession Tax

₹2,400

Insurance Premium

₹3,000

Special Allowance

₹1,40,000

Total (B) = ₹27,000 (Sum of all deductions)

Now, you will have to just subtract the gross salary with the total of all deductions.

Net Salary = Total (A) – Total (B)

                  = ₹ (3,50,000 - 27,000)

                  = ₹3,23,000

So, the net pay of Arpit is ₹3,23,000

What Are the Factors Influencing the Calculation of Net Salary?

What Are the Components of Net Salary?

Is Net Pay Essential to Apply for Loans and Insurance?

Frequently Asked Questions