What is Net Salary, Concept of Net Income and Gross Wage. Very few of us understand the real meaning of numerous terms like Gross Salary, CTC (Cost to Business), Take House Income, Net Wage, and so on
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What is Net Wage, Idea of Net Wage
So, let us here try to make an attempt to understand the different terms connected with Income under the Head ‘Income’.
Expense to Business: It is essentially the cost incurred by the business on working with & sustaining the staff member. Usually, it is similar to Gross Salary other than for the difference of gratuity and Provident Fund. CTC consists of all Allowances, Perquisites, Provident Fund, Medical Insurances, Gratuity, Pension and so on
The CTC likewise consists of totally free meal discount coupons, or concessional meal vouchers, cash invested in their beverages and home entertainment, along with, if any taxi services are being supplied by the company for the workers.
The CTC covers both Direct Advantages, Indirect Advantages & Cost Savings Cover.
The following is a diagram which gives us an illustrative list of the things covered under Expense to the Company and their bifurcation into Direct and Indirect Advantages in addition to savings for their future.
| Direct Advantages | Ind irect Advantages | Cost Savings Contribution |
| Standard Income | Interest Free Loans | Superannuation benefits |
| Dearness Allowance (DA) | Food Coupons/Subsidized meals | Company Provident Fund (EPF) |
| Conveyance Allowance | Company Leased Accommodation | Gratuity |
| Home Lease Allowance (HRA) | Medical and Life Insurance premiums paid by employer | — |
| Medical Allowance | Earnings Tax Cost Savings | — |
| Leave Travel Allowance (LTA) | Office Space Rent | |
| Lorry Allowance | ||
| Telephone/ Smart Phone Allowance | ||
| Incentives or benefits | ||
| Special Allowance/ City Compensatory allowance, etc. |
Gross Salary is the total salary inclusive of all allowances & perquisites which are paid by the company to and for a particular worker.
It includes benefit, overtime pays, etc.
Net Salary/ Take House Income:
The net salary is exact same as Take Home Wage. TDS & other needed reductions are made from the Gross Salary to arrive at this figure.
We can compute Net Income by doing the following estimations:
Gross Salary– TDS– Contribution towards PF– PT (Professional Tax)
In this way, we can analyze what we will really earn if we are simply aware of the Expense to the Business. Likewise, make sure you do all these calculations if you get an offer from a company and after that decide of accepting or turning down the deal.
Distinction in between Gross Salary and Net Income?
The distinction between gross salary and net income is that while gross wage is your wage before any reductions are made from the income, net income is the salary an employee takes home after all reductions have actually been made.
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