What gross salary includes
- Basic salary, the fixed core of the pay.
- House rent allowance (HRA).
- Special allowance and other fixed allowances the company pays, such as conveyance or leave travel allowance.
- Overtime, bonus and incentives paid in that period.
- Arrears paid in that period, such as a backdated increment.
It does not include what the employer pays on the employee's behalf: the employer's share of PF and ESI, the gratuity provision or insurance premiums. Those are part of the cost to company (CTC), but they are never paid out as salary.
Gross salary, CTC and net salary
- CTC = gross salary + the employer's contributions (PF, ESI, gratuity, insurance).
- Gross salary = CTC − the employer's contributions.
- Net salary = gross salary − the employee's deductions (their PF share, professional tax, TDS, loan recoveries).
An example
Take an employee with a CTC of ₹6,00,000 a year and a basic salary of ₹20,000 a month. The employer's PF share is 12% of basic, ₹2,400 a month or ₹28,800 a year, and the company sets aside 4.81% of basic for gratuity, about ₹11,544 a year. The gross salary is ₹6,00,000 − ₹28,800 − ₹11,544 = ₹5,59,656 a year, about ₹46,638 a month.
Each month, the employee's own PF (₹2,400), professional tax where the state levies it (₹200 in many states) and TDS are then deducted from ₹46,638 to arrive at the net salary. Our in-hand salary calculator works this out for any CTC.
Why the split matters
Two salaries with the same gross can cost the employer different amounts and leave the employee with different take-home pay, because PF, gratuity and some tax exemptions depend on how the gross is split between basic, HRA and allowances. Under the Code on Wages, allowances beyond half of total pay are added back to wages for PF and gratuity, so a structure with a very low basic no longer lowers those contributions.
Gross Salary in India
On an Indian payslip, gross salary appears as total earnings, before the deductions column. Several rules key off it: ESI applies to employees whose gross wages are up to ₹21,000 a month, professional tax slabs in most states are set on monthly gross salary, and TDS is worked out on the year's gross salary less the exemptions and deductions the employee's tax regime allows, such as the ₹75,000 standard deduction under the new regime.
When a salary is revised, HR teams usually show the new CTC and the new gross side by side, so that employees can see how much of the increase reaches their monthly pay.
How Zimyo helps
Zimyo's Payroll software runs monthly payroll and sends employees their payslips.
