Deductions | Meaning and Definition

What is the meaning of deduction? 

The deduction meaning is the amount of money that has been included in the CTC that is being offered to the employees but it is not being included in the amount of money that the employer will get to take home. This amount of money is being deducted from the compensation of the employee for various purposes such as income tax, life insurance premium, health insurance premium, etc. The gross salary of an employee is totally different from the employee’s net salary. The net salary of an employee is also called the take-home salary which is the amount left after certain deductions.  

Types of deductions according to the Indian Payroll System:

  •  Employee’s State Insurance Corporation (ESIC)
  •  Provident Fund (PF)
  •  Labor Welfare Fund
  •  Professional Tax