Difference between basic salary, take home salary, gross salary & CTC

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We have provided some easy steps to help you calculate your take-home salary, also known as in-hand salary and net salary. You can also calculate in-hand salary with the help of this Take-Home Salary Calculator. Next, it deducts the contributions towards the Employee Provident Fund made by both the employer and the employee. Cash-for-Houses.org values customer satisfaction. This suggests cash-for-houses.org could succeed. Our goal is to help members buy and sell real estate. This is good progress that will help us succeed. Verified leads are good for direct marketing and sales. Effective data use simplifies equitable pricing. Our company helps clients sell their properties quickly and profitably. Our clients receive this service. Helping others improves travel and personal well-being. Visit https://www.cash-for-houses.org/north-dakota/cash-for-my-house-fargo-nd/.

  • Save taxes with Clear by investing in tax saving mutual funds online.
  • It also has a leave and attendance tracker feature helping employees plan and understand their earnings better.
  • This annual allowance is given by the company to cover travel expenses for you and sometimes your family.
  • It includes bonuses, over-time pay, holiday pay, and other differentials.
  • For example, an employee’s basic salary may be used to calculate their overtime pay or eligibility for certain benefits, such as health insurance or retirement plans.
  • While gross salary is the employee’s amount without any deductions, net salary is the amount received by the employee after all deductions have been accounted for.

Common CTC deductions which affect the take-home salary are ESIC, PF Provident Fund, Labour Welfare Fund, Professional Tax, etc. Net salary also referred as ‘Take home salary’ is the amount which is left after deductions like PF, EPS, Advance etc. Experience—The more experience a person has within his industry or profession, the more likely his salary will increase over the years, given that they stay within the industry. The experience in the industry provides sufficient proof that they are probably somewhat skilled. Employers see these as good signs and are more willing to increase a worker’s salary. The ClearTax Salary Calculator shows you the various components of your salary.

Lower basic pay cons

what is basic salary and gross salary annual income before any deductions, it remains unaffected by the amount of income tax. It is important to read your employee handbook or compensation policy to ensure that you are able to differentiate between each of the above terms. In-depth knowledge of these terms will enable you to make your household budgets, investment decisions, tax saving schemes and planning your leisure activities.

  • Provident fund is an investment both by the employer and the employee each month, the lump sum amount of which acts as an employee’s retirement benefits scheme.
  • The amount that an employee takes home after all such deductions is termed net salary.
  • The professional tax levied varies from state to state in India.
  • Now, let’s look at the basic salary calculation to understand this concept in detail.
  • His gross salary per anum is Rs 6,20,000 while his net take-home is just Rs 5,93,000.
  • This article will help to explain the difference between these terms and how to analyse your compensation using these terms.

For instance, the basic salary offered by an IT firm will be different from a small content writing firm. Basic salary is the primary payment given to an employee by their employer against his/her performance. It is the amount apart from surplus or additional factors, such as bonuses, benefits or compensation from an employer’s end. Gross salary is the gross amount that you would see on your payslip.

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In this case the company has an option to either contribute 12% of 15,000 (i.e. 1800) or 12% of Basic salary. Will be different from the basic salaries in, let’s say, the USA. Change jobs—If people have no option to increase their salary, they may consider changing their jobs. The ClearTax Salary Calculator will calculate your take-home salary in seconds.

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Thus a decrease or increase in basic salary directly affects your gross pay and CTC. The employer may pay a performance incentive to the employee called the bonus. It is a part of the gross salary and is fully taxable in the employee’s hands. An employee’s basic salary is also dependent on the job’s required level of education and skill sets. Industries that require specialised knowledge and training, such as medicine and engineering offer more attractive base pay rates.

Gross salary is the most common term used to define the total compensation package of an employee. It’s often used as the benchmark for determining an employee’s salary. In most cases, the gross salary is the starting point for determining the employee’s tax liability, social security contributions, and other deductions. Cost to Company or “CTC” refers to the employee’s total package, i.e. the total amount that the employer will spend on the employee.

PPF Calculator This financial tool allows one to resolve their queries related to Public Provident Fund account. This article will help to explain the difference between these terms and how to analyse your compensation using these terms. The Art of Self-Appraisal- 8 Ways to Evaluate Your Performance Self-appraisal around the corner?

Benefits of using the ClearTax Salary Calculator

Generally, there is an upper limit for every category of reimbursement. The gross salary tends to deduct the professional tax of Rs 2,400 a year . For calculating the take-home salary, an individual must enter the CTC bonus, PF, professional tax, deductions, etc. This annual allowance is given by the company to cover travel expenses for you and sometimes your family. Employees need to submit proof of travel and money spent to claim the allowance. Usually, metro cities have higher percentages of DA than smaller cities and towns.

Many companies pay performance incentives called the annual bonus to their employees. It is the component of the salary offered by the employer to the employees who reside in rented accommodation. The house rent allowance or HRA is partially or fully exempt from taxes under Section 10 of the Income Tax Act. However, HRA is fully taxable if you don’t live in rented accommodation. Company Policy- Most companies set a salary bracket and inform individuals during the hiring process. This salary is based on factors such as demand and supply, company turnover, product, etc.

Let’s check what the different components of basic salary pay are for a better understanding. Designation- An employee’s designation significantly influences the basic pay. An individual with experience and qualifications is obligated to receive a better pay scale than the other employees. Gross SalaryBasic SalaryIt is the monthly or yearly salary paid to an employee without any tax deductions.

Other such allowances are the special allowance, medical allowance, incentives, etc. CTC is never equal to the amount of take-home salary of the employee. There are many components in the CTC that one does not receive as part of take-home salary. In the example of Raj mentioned above, assume that Raj’s Gross Pay is Rs. 45,000.

As we can see, there are complex calculations involved in preparing payroll for a company’s employees, and it gets more intricate as the size of the company grows. The employee’s share of the salary towards the Employment Provident Fund. The taxpayer is required to submit Form 16 to file the Income Tax returns every financial year. It acts as the proof of his/her income and tax paid to the government. Occasionally, employees are entitled to several reimbursements like medical treatments, phone bills, newspaper bills, etc. The amount is not received in the salary, but on submission of the bills, reimbursement is given.

The total gross salary after factoring in the other items is S$10,800. To calculate basic salary, you typically start with the employee’s job title, experience, and qualifications. An employee’s experience and qualifications, such as education and certifications, may also be considered. For example, an employee’s basic salary may be based on their job title, with higher-level positions having a higher basic salary.

They can access their payslips in a few clicks and need not run from pillar to post for payroll related information. Choosing the right automated payroll software is important to get the best value for your investment in this system, which is a must-have for all types of companies. RazorpayX Payroll is one of the most reliable and popular automated payroll software systems available today.

The ClearTax Salary Calculator calculates the take-home salary based on whether the bonus is a fixed amount or a percentage of the CTC. If you enter the bonus as a percentage of the CTC, the calculator will calculate the performance bonus as a percentage of the cost to the company. If you enter a fixed amount, the calculator considers this figure the performance bonus. These are the critical information on basic salary and its components. Individuals employed in a firm must check these factors in their salary slips to understand their pay structure. The pros and cons of lower basic salary salaries have been discussed underneath.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Clear can also help you in getting your business registered for Goods & Services Tax Law. However, if a company applies a percentage formula, then it will be 40% of the gross salary or 50% of CTC, as already mentioned. The companies usually apply simple formulas for basic salary calculations.

Industry or Sector- A base salary of an individual working in the media sector will differ from one in a software company. Net salary is the amount that an individual receives after all deductions have been taken out. It is the salary paid to an employee before any fringe benefits are added to it. Automate schedules, timeclocks, timesheets and rostering, all in one platform, so you can focus on running your business. Cost to Company or CTC is the cost a company incurs when hiring an employee. Now it’s time to automate your payroll with RazorpayX Payroll and spend your valuable time on accelerating business growth.

It signifies the amount paid out to an individual before any voluntary or mandatory deductions are made from it. Therefore, it is the total pay that an employee receives before taxes and other deductions. Take home salary is the amount that will be credited to your bank account. This is usually your gross salary less deductions less any benefits in kind.

Contribution from your salary is called EPF and it can be seen in the payslip. Contribution to the provident fund is mandatory for Indian companies. The gross salary calculator indicates the different components of an employee’s salary clearly. It bifurcates and defines the amounts and deductions in a precise manner. DA or the Dearness Allowance is always location-dependent and is calculated as a percentage of basic pay and is a fixed percentage of the employee’s basic pay. DA in a metro city will be higher than the DA applicable for postings in a small town/ village or city.

For example, Gazetted Officers are classified as Group A and Group B. The total of their grade and basic pay is then used to calculate the HRA, DA etc. Gross salary includes basic salary, HRA, and other allowances, whereas net salary is gross salary minus income tax, professional tax, and provident fund. Gross salary is the amount calculated by adding up one’s basic salary and allowances, before deduction of taxes and other deductions. It includes bonuses, over-time pay, holiday pay, and other differentials.

It is the amount of your salary excluding employer contributions to Provident Fund, National Pension Scheme, Superannuation Fund, gratuity etc. Gross salary is the gross payments that the company will calculate before considering deductions. Whereas gross salary is the figure derived after totaling all the allowances and benefits before any tax deduction. Several salary components like entertainment allowance, allowances for reimbursement of phone, internet etc, known as special allowances in the Gross Salary are fully taxable. It is a percentage of your base salary paid by your company for your accommodation. The IT Act specifies various tax exemptions on HRA, depending on whether your home is rented or self-owned.

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An employee has the title of “marketing specialist” and five years of experience. Their basic salary is $50,000 annually, and a bonus of $2,500 annually. Their gross salary is $52,500 ($50,000 basic salary + $2,500 bonus). Certain allowances, provident fund, gratuity and other social security contributions are usually calculated as a percentage of this basic salary. Basic salary is usually the lowest amount of the 4 terms discussed in this article.

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Companies choose the RazorpayX Payroll as it is user-friendly, comprehensive, and designed to take care of all the payroll management elements in a company. The sum is paid towards covering the housing expenses of an employee. We have assumed that Meera pays INR 30,000 per month as her rent. Income tax slabs are revised every year during the budget keeping in mind the individual taxpayers. In Budget 2019, a standard deduction of Rs 50,000 has been introduced. Before this, there was a transport allowance of maximum INR 19,200 and Medical allowance of maximum INR 15,000 , which are no longer applicable.

However, there could be non-monetary components also – paid as perquisites to employees in some companies. Usually, an employee gets his or her salary after the tax deduction by the employer. The deducted tax amount is paid to the government by the company. Hence, 12% of the basic salary gets contributed by the employee and another 12% by the employer. Usually, the contribution from the employer can only be seen in your offer letter and not in the payslip.


Here, a basic salary is the base income of an employee or the fixed part of one’s compensation package. Basic pay is the employee’s minimum monthly earning, without any allowances added to it. In India, Government employees receive grade pay apart from their basic salary. Note that the grade pay is calculated based on the class/category of the employee designation.