Gross salary meaning

Gross salary meaning

"Gross salary" refers to the total salary or earnings an employee receives before any taxes, deductions, contributions, or other adjustments are subtracted.

Annual gross salary meaning

Annual gross salary is one's earnings before deductions over the span of a year. Annual gross salary is also called total gross salary.

Annual gross salary = Monthly gross salary x 12 

Monthly gross salary meaning

Monthly gross salary is one's earnings before deductions every month. When multiplied by 12, it is the annual gross salary.

Monthly gross salary = Annual gross salary/12 

For instance, if someone says they have an annual gross salary of ₹1,200,000 (in the Indian context), it implies that before any deductions like Provident Fund (PF), Professional Tax (PT), Income Tax, or any other possible deductions, they earn ₹1,200,000 in a year. This amount is then typically broken down into monthly payments, so in this example, the monthly gross salary would be ₹100,000 (₹1,200,000 divided by 12 months).

Difference between gross salary, net salary (take home) and basic salary

Term Definition Components/Considerations
Basic Salary The foundational component of an employee's compensation, excluding allowances, benefits, or any other incentives. It's a fixed part of one's compensation structure, and usually forms the largest chunk of the salary. Other components like HRA, Provident Fund contributions, etc., are often calculated as a percentage of this basic salary.
Gross salary The total income an employee earns before any deductions. Basic Salary + House Rent Allowance (HRA) + Special Allowances + Other Allowances (e.g., transport, medical, etc.)
Net salary The actual amount an employee takes home after all deductions have been made from the gross salary. Gross Salary - (Provident Fund + Professional Tax + Income Tax + Other Deductions)

What are the components of gross salary?

Components of gross salary

How to calculate gross salary?

You can calculate gross salary by adding all the components of gross salary.

Gross Salary (India) = Basic Salary + HRA + Special Allowances + Bonuses + Other Allowances.

Frequently asked questions

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