Net salary, also called take-home pay, is the amount an employee actually receives after all deductions are taken from gross salary. It is the figure that lands in the bank account each month. Net salary is what an employee feels most directly, yet it is often lower than people expect, because statutory deductions such as provident fund, income tax, and professional tax come out of gross pay first. Understanding the gap between gross and net is key to setting clear expectations at hiring.
What is deducted to reach net salary?
Net salary is gross salary minus a set of employee-side deductions. The common ones in India are these.
- Provident fund: the employee's 12 percent contribution on basic salary plus dearness allowance.
- Income tax (TDS): tax deducted at source based on the employee's estimated annual tax.
- Professional tax: a small state-levied tax, where applicable.
- Other deductions: items such as the labour welfare fund, loan recoveries, or voluntary contributions.
A simple worked example
Suppose an employee has a gross salary of 80,000 rupees (about 960 US dollars) a month, with combined deductions of 12,000 rupees (about 144 US dollars) for provident fund, tax, and professional tax. The net salary is the gross figure minus those deductions.
| Line | Monthly amount |
|---|---|
| Gross salary | 80,000 rupees |
| Less deductions | 12,000 rupees |
| Net salary | 68,000 rupees |
In this example the take-home pay is 68,000 rupees (about 816 US dollars). The exact figure varies with the employee's tax regime, declared investments, and applicable state deductions.
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