Today we are discussing Net Salary which is the in hand salary that you receive every month into your bank account after all the reductions and cuttings that include allowances, taxes, and more.
Working in a company can be a handy thing and a great way to work up your career but the main thing that drives is basically the salary that you get at the end of the month, and there are a lot of things that are included in the salary of a working man and there are a lot of deductions that go in as well that make a huge difference in your salary and finally comes as take home salary.
In the HR terminology, the Net salary can be explained as Gross salary minus the deductions and exemptions, and basically, the deductions include Insurance of any type while the exemptions can be reimbursements or any other costs included.
Net Salary = Gross Salary – Deductions – Exemptions
Net Salary = Gross Salary – Income Tax – Provident Fund – Professional Tax – Insurance
While the deductions can include the main following as mentioned below
- Income Tax: The tax that is liable on your monthly gross salary
- Provident Fund: Every month a certain percentage of your basic salary is deducted from your retirement fund as per the EPFO scheme.
- Professional Tax: This is a tax that is charged by your company as part of professional tax.
- Insurance: This is mandatory insurance that most of the companies add to the gross salary that has to be paid.