Glossary
What is gross salary and net salary?
The difference between gross salary and net salary, which deductions sit between them, and how both relate to CTC.
Updated
In short
Gross salary is the sum of earnings before deductions; net salary is what the employee receives after PF, professional tax, TDS and other deductions. SimpleERP shows both on every payslip and in the payroll register.
Gross salary is the total of an employee's earnings for the month, such as Basic, HRA and allowances, before anything is deducted. Net salary, or take-home pay, is gross salary minus the employee's deductions: provident fund, ESI, professional tax, TDS and any advance recovery. Employer contributions sit outside both and are added to gross to give the cost to company.
Gross vs net salary: a worked example
Muthu K, welder at Lakshmi Steel Furnitures, in October 2026. Rates are as notified; professional tax is shown at ₹180 for illustration.
| Line | Amount |
|---|---|
| Basic | ₹13,000 |
| HRA, 40% of Basic | ₹5,200 |
| Conveyance | ₹1,300 |
| Gross salary | ₹19,500 |
| Provident fund, 12% of Basic | −₹1,560 |
| ESI, 0.75% of gross | −₹146.25 |
| Professional tax | −₹180 |
| Net salary | ₹17,613.75 |
FAQ
Questions, answered
Is gross salary the same as CTC?
Gross salary is not the same as CTC. Gross salary is the employee's earnings before deductions. CTC, cost to company, adds the employer's own contributions, such as PF and ESI, on top of gross. For Muthu K, gross is ₹19,500 and the monthly cost to company is ₹21,693.75.
Which deductions take gross salary down to net?
Usually the employee's provident fund, ESI where it applies, professional tax where the state levies it, and TDS where income tax is due. Recoveries of salary advances and loss of pay for unpaid days also reduce what reaches the bank.
Is income tax worked out on gross or net salary?
Income tax starts from gross salary, then exemptions, the standard deduction and other deductions allowed under the employee's chosen regime are applied. It is not worked out on net pay. This is not tax advice; ask your CA.
Where are gross and net totals for the month in SimpleERP?
On the payroll run review screen, which totals gross, deductions, employer contributions and net, and in the payroll register report, which lists every employee with each component and can be exported to CSV.
Related
Keep reading
CTC (cost to company)
Cost to company: gross pay plus the employer's contributions, usually quoted per year in an offer letter.
Read moreStatutory deductions
Deductions from salary required by law, such as PF, ESI, professional tax and TDS, held as liabilities until paid.
Read morePayslip
The monthly statement of paid days, each earning, each deduction and the net pay an employee receives.
Read more
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