House Rent Allowance: House rent allowance or HRA is generally granted by an employer to an employee to provide for the cost of accommodation. The HRA received by an employee can be used for meeting the rent of residential accommodation at the place of work. There are certain expenses, which an employer incurs towards the welfare of the employees in the organisation. These expenses will not be included in the CTC of an employee. To understand the calculation of gross salary and net salary better, let us take the help of an example:.
Arun works at an IT firm. His gross salary per anum is Rs 6,20, while his net take-home is just Rs 5,93, Here are the main differences between the two —. It is the maximum salary paid by the employer. It includes the basic pay and all the allowances. It is a part of the gross salary. It is the amount paid by the employer without factoring in the allowances and perquisites. It is the cost that the company incurs in employing an individual.
CTC denotes the maximum compensation paid by the company to an employee inclusive of the basic pay, allowances and perquisites. Moreover, if there are EPF contributions, gratuity payments or superannuation benefits payable to employees, they are also added in calculating the CTC. The CTC can be divided by the number of months to ascertain the gross monthly remuneration that you would be eligible for.
For organisations having less than 20 employees, EPF registration is voluntary. For employees having a higher salary, EPF is a voluntary saving. Whether mandatory or voluntary, EPF savings have become a common component of most organisations. Employers also contribute the same amount but 8.
The EPF contribution would be as follows —. PF calculation is done on the basis of the basic salary and the dearness allowance. The gross monthly remuneration is not used for PF calculation because it consists of other allowances too which are not included in the salary when calculating the EPF contributions. Definition of gross salary under Section 17 1. When calculating the tax liability, the gross pay is subject to tax-free deductions and exemptions after which the tax liability is calculated.
The following are deducted from the gross salary to calculate the amount of salary that would be subject to tax —. After all these deductions and exemptions are deducted from the gross pay, the tax liability is computed as per the applicable income tax slabs.
For the financial year , the income tax slab rates are as follows for resident Indian individuals aged up to 60 years —. To reduce your tax liability you can use various ways to save taxes as the Income Tax Act, allows different types of deductions and exemptions. The ways in which you can save taxes include the following—.
Section 80C allows a deduction of up to INR 1. Make use of the full limit of the section by investing in —. So, invest in suitable health insurance policies for yourself and your parents. If you buy a home and avail of a home loan, you can get dual tax benefits. However, if you do receive regular and guaranteed hours from your employer, you can calculate your weekly, monthly or yearly gross income rather easily. Simply multiply the number of hours you receive each week by the total amount you earn in an hour.
If your employer does not provide paid time off, remember that your gross pay will decline if you take any days off. If you receive a raise at any point in the year, adjust your calculation to account for the increase in hourly pay. Find jobs. Company reviews. Find salaries. Upload your resume. Sign in. What is gross pay? Gross pay vs. Basic Salary Gross Salary Basic salary is the amount paid to an employee before any extras are added or taken off.
It does not include any allowances, overtime or any extra compensation Gross Salary is the amount of salary after adding all benefits and allowances but before deducting any tax For Example: An employee has a gross salary of Rs.
What is Cost to Company? Gross Salary. Deductions from Gross Salary To calculate Income Tax, gross salary minus the eligible deductions are considered.
Please note: The taxation process is different for self-employed and salaried individuals. Gross Salary under Section 17 1 As per section 17 1 , salary includes the following amounts received by an employee from his employer, during the previous year.
Wages Any advance of salary Any fees, commission, perquisites or profits in lieu of or in addition to any salary or wages The contribution made by the Central Government or any other employer in the previous year, to the account of an employee under a pension scheme, referred to in Section 8OCCD.
Read More About Tax. Income Tax. Tax Forms. Service tax. Commercial Tax. Tax Sections. Road Tax. Property Tax. Professional Tax. Gross Salary is the amount of salary after adding all benefits and allowances but before deducting any tax.
Net Salary is the amount that an employee takes home.
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