What is Net salary?

Definition

Net salary, or take-home, is what actually reaches the employee bank account: gross salary minus the employee provident fund contribution, professional tax, employee state insurance where applicable, tax deducted at source, and any recoveries.

How it works

Net is the only figure in a salary structure the employee experiences directly, and it is the last one most offer letters mention. It moves month to month with loss of pay, arrears, reimbursements and the tax deducted, so a candidate told a single number will find it varies.

What it means in India

The standard deduction stack on an Indian payslip is the employee provident fund contribution of twelve percent of basic and allied wages, professional tax if the state levies it, employee state insurance where the employee falls under the wage ceiling, and income tax deducted at source. Twelve states and union territories charge no professional tax at all, so the same salary produces a different net in different states.

What people get wrong

• Promising a net figure in an offer letter. Tax deducted at source varies with the employee declarations and regime choice, so a promised net becomes a monthly argument.
• Forgetting that professional tax is a state levy. Moving an employee from a state that charges none to one that does reduces their take-home without anybody changing their salary.

Work out your own number

The arithmetic on this page is easier to check against a real salary than to follow in prose, so there is a free page that does it for you. No sign-up.

Terms this one depends on

More on pay and salary structure

Where this shows up in practice

Almost everything on this page ends up as a line on a payslip or a figure in a register. Shiftelio keeps attendance, leave, salary structure and the statutory deductions in one place, so the number in the letter and the number in the payslip come from the same record.