Salary is the regular payment made by an employer to his or her employees in exchange for the work performed by them. It is paid at fixed intervals, generally on a monthly basis, and often expressed as an annual sum. Salaries are usually determined by comparing what other employees in similar positions are earning in the same industry and region. In many countries, the supply and demand of resources play a major role in assessing the salary - how many vacancies are there for a specific position as against the number of people in the area who could fill that position.
It is a fixed sum paid to employees in exchange for the work performed by them. The basic income is derived before any reductions or increases due to overtime or bonus, allowances are made. Basic salary is a fixed part of the compensation structure of an employee and forms the core of the salary of an employee. It does not vary, unlike the other aspects of Cost to Company. The entire amount of the basic salary shall be part of the in-hand salary.
Gross salary is the term used to describe all the money an employee has made working for the company in a year. It is the salary which is without any deductions like income tax, PF, medical insurance etc. Gross salary is however, inclusive of bonuses, overtime pay, holiday pay, and other differentials. Some of the components of gross salary include basic salary, house rent allowance, special allowance and conveyance allowance, among others.
Basic salary is the figure agreed upon between a company, its employee, without factoring in bonus, overtime, or any kind of extra compensation. Gross salary, on the other hand, includes overtime pay and bonuses, but does not consider taxes and other deductions. Say for instance, an employee’s gross salary is Rs. 40,000 and a basic salary is Rs. 20,000. This means that the individual will receive Rs. 20,000 as fixed pay and the remaining Rs. 20,000 in allowances such as house rent allowance, conveyance, dearness allowance, etc.
Cost to company is the amount that a company spends – directly or indirectly – in hiring and sustaining the services of an employee. In other words, CTC is a term for the total salary package of an employee. It indicates the cumulative amount of expenses an employer spends on an employee during one year.
The various components of CTC are as under:
| Direct Benefits |
|---|
| Basic Salary |
| Conveyance Allowance |
| Dearness Allowance |
| House Rent Allowance (HRA) |
| Medical Allowance |
| Leave Travel Allowance (LTA) |
| Vehicle Allowance |
| Telephone/Mobile Phone Allowance |
| Incentives or bonuses |
| Special Allowance |
| Indirect Benefits |
|---|
| Food Coupons/Subsidized meals |
| Company Leased Accommodation |
| Interest Free Loans |
| Income Tax Savings |
| Health and Life Insurance premiums paid by employer |
| Savings Contribution |
|---|
| Gratuity |
| Superannuation Benefits |
| Employer Provident Fund (EPF) |
Net salary, or more commonly referred to as take-home salary, is the income that an employee actually takes home after tax, provident fund and other such deductions are subtracted from it.
Net Salary = Gross Salary (less) Income Tax (less) Public Provident Fund (less) Professional Tax
Net Salary is usually lower than gross salary. It can be equal in cases where income tax is 0 and when the salary that the employee is earning is less than the government tax slab limits.
Gross Salary is the figure derived after totalling all the allowances and benefits but before deducting any tax, while net salary is the amount that an employee takes home. An individual's gross salary is inclusive of benefits such as HRA, conveyance allowance, medical allowance etc. Net Salary = Gross salary - All deductions like income tax, pension, professional tax, etc. Net salary is also referred to as Take Home Salary.
Salary is the regular payment made by an employer to his or her employees in exchange for the work performed by them. It is paid at fixed intervals, generally on a monthly basis, and often expressed as an annual sum. Salaries are determined usually by comparing what other employees in similar positions are earning in the same industry and region.
Step 1 - Compute gross income
Step 2 - Add income from all other heads
Step 3 - Deduct loss from house property. The figure derived will be the employee’s total income on which tax is required to be deducted.
Step 4 - Assess the income tax as per the income based on slab rate along with the surcharge and cess as applicable.
Step 5 - Each month, 1/12th of the amount of tax shall be deducted.
Step 6 - Excess or deficit, if any, arising from any earlier deduction can be adjusted by increasing or decreasing the amount of subsequent deductions in the same financial year.
The income tax slab for individuals and HUF (less than 60 years old) for FY 2018-19
| Income Tax Slabs | Tax Rate | Health and Education Cess |
|---|---|---|
| Income up to Rs. 2,50,000 | No tax | - |
| Income from Rs. 2,50,000 – Rs. 5,00,000 | 5% | 4% of Income Tax |
| Income from Rs. 5,00,000 – Rs. 10,00,000 | 20% | 4% of Income Tax |
| Income more than Rs. 10,00,000 | 30% | 4% of Income Tax |
The income tax slab for senior citizens (60 years old or more but less than 80 Years old) for FY 2018-19
| Head 1 | Head 2 | Head 3 |
|---|---|---|
| Income up to Rs. 3,00,000 | No tax | - |
| Income from Rs. 3,00,000 – Rs. 5,00,000 | 5% | 4% of Income Tax |
| Income from Rs. 5,00,000 – Rs. 10,00,000 | 20% | 4% of Income Tax |
| Income more than Rs. 10,00,000 | 30% | 4% of Income Tax |
The income tax slab for senior citizens (80 years old or more) for FY 2018-19
| Tax Rate | Health and Education Cess | |
|---|---|---|
| Income up to Rs. 5,00,000 | No tax | - |
| Income from Rs. 5,00,000 – Rs. 10,00,000 | 20% | 4% of Income Tax |
| Income more than Rs. 10,00,000 | 30% | 4% of Income Tax |
HRA will be 50% of basic salary if the taxpayer is residing in a metro city and 40% of basic salary if the taxpayer is residing in a non-metro city.
Gross salary is the term used to describe all the money an employee has made working for the company. It is the salary which is without any deductions like income tax, PF, medical insurance etc. Gross salary is however, inclusive of bonuses, overtime pay, holiday pay, and other differentials. Some of the components of gross salary include Basic Salary, House rent allowance, Special Allowance and Conveyance Allowance, among others.
Net salary, or more commonly referred to as take-home salary, is the income that an employee actually takes home after tax, provident fund and other such deductions are subtracted from it.
Net Salary = Gross Salary (less) Income Tax (less) Public Provident Fund (less) Professional Tax
Cost to company is the amount that a company spends – directly or indirectly – in hiring and sustaining the service of an employee. In other words, CTC is a term for the total salary package of an employee. It indicates the cumulative amount of expenses an employer spends on an employee during one year.
Gross salary is the amount of salary after totalling all the benefits and allowances but before deducting any tax, while net salary is the amount that an employee takes home. An individual's gross salary is inclusive of benefits such as HRA, conveyance allowance, medical allowance, etc. Net Salary = Gross salary - All deductions like income tax, pension, professional tax, etc. Net salary is also referred to as Take Home Salary.
Basic salary is the figure agreed upon between a company its employee, without factoring in bonus, overtime, or any kind of extra compensation. Gross salary, on the other hand, includes overtime pay and bonuses, but does not consider taxes and other deductions. Say for instance, an employee’s gross salary is Rs. 40,000 and basic salary is Rs. 20,000. This means that the individual will receive Rs. 20,000 as fixed pay and the remaining Rs. 20,000 in allowances such as house rent allowance, conveyance, dearness allowance, etc.
Basic salary is the figure agreed upon between a company its employee, without factoring in bonus, overtime, or any kind of extra compensation. Gross salary, on the other hand, includes overtime pay and bonuses, but does not consider taxes and other deductions. Say for instance, an employee’s gross salary is Rs. 40,000 and basic salary is Rs. 20,000. This means that the individual will receive Rs. 20,000 as fixed pay and the remaining Rs. 20,000 in allowances such as house rent allowance, conveyance, dearness allowance, etc.
