Net Salary Calculator
Annual Income
Annual Deduction
Net salary refers to the amount of wages that you receive after various deductions from your gross income/gross salary. It is also known as bring in or take home salary. Net salary is also similar to adjusted gross income. In simple words, gross salary or gross pay is what an employee receives before the taxes and payroll deductions and the amount after performing those deductions in Net salary.
In this article, we will talk about the deductions made in the gross salary before being credited to the employers and how the net salary is calculated. Net Salary Calculator is a tool that makes mathematical calculations easy.
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Net Income vs Adjusted Gross Income
The difference between net income and adjusted net income is given below:
| Aspect | Adjusted Gross Income (AGI) | Net Salary |
| Definition | Represents total income minus specific deductions | The amount an employee takes home after deductions |
| Applicability | Used in the U.S. tax system | personal finance and payroll |
| Calculation | AGI = Total Income – Above-the-line Deductions | Net Salary = Gross Salary – Deductions |
| Purpose | Used to calculate taxable income | Indicates the actual amount received in paychecks |
| Components of Deductions | Includes above-the-line deductions | Includes taxes, Social Security, Medicare, etc. |
| Timing of Calculations | Calculated before tax credits and itemized deductions | Calculated after all deductions are applied |
How do you calculate net salary?
To calculate net salary, you need to subtract all the deductions from your gross salary i.e. money before any deductions. The amount left after that subtraction is your net salary.Net Salary Calculator Formula:
Net Salary = Gross Salary – Deductions Where:- Gross salary: First up we have to calculate the gross salary that has been fixed by the employer. Gross salary is the total amount without deductions. It includes the basic salary and any additional allowances or bonuses.
- Deductions: Deductions are stuff like social security contributions, health insurance premiums, retirement contributions, income tax rates, and whatever other deductions apply. The specific deductions can change depending on the country, state, and company rules.
What are other deductions made from the salary?
Some of the common deductions that are made from your salary are:- Provident fund’s contributions to employees: EPF (Employment Provident Fund) refers to a scheme where both the employer and employee contribute equally. The employer and employee both need to contribute around 12% of the basic salary to this find. Net Salary Calculator can be used to calculate the monthly or annual deductions. This contribution helps build a retirement corpus giving you financial stability after your service years. In short, PF is a powerful saving plan that offers financial savings for the future even though it is deducted from the salary in the present.
- Income tax: Every individual whose income exceeds a certain limit annually has to pay a certain amount to the government which is called tax. Income tax refers to the amounts that the government imposes on the financial income or salary of the employees. It is one of the major sources of revenue for the government all over the world. This tax is the backbone of the country as it helps to run the country smoothly with better financial conditions.
- Tax from profession: Tax from profession, Professional tax refers to the amount that is deducted from your gross salary by the employer. Professional taxes somehow vary from state to state and from the amount of income. Income tax is well known, but very few know about professional tax beyond the term itself. The professional tax is said to be levied on only those employees who are said to have income above a specific limit, but professionals from every background must pay the professional tax.
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FAQs
What is take home salary?
Take home salary is another phrase for Net salary which we get after making certain deductions from our gross wage.
What is the monthly net salary?
Monthly Net Salary refers to the amount that an employee gets paid after his/her completion of a month in the job after the deductions are made.
What is the Net salary calculator formula?
The Net salary calculator formula is: Net salary = Gross salary-Deductions(Professional tax, provident fund, income tax)
Are net salary and in-hand salary both the same?
Yes, net salary and in-hand salary are the same as both effectively are the amount that is credited to you.
What is CTC?
CTC is the annual cost a business pays an employee including income and extra benefits.
What is an example of net income?
Net income is the amount that is received after the deductions. For employees, it refers to the money received after taxes, medical expenses, and retirement contributions.
When can I withdraw my entire PF amount?
You can only withdraw your PF amount on retiring or when you are no longer an employer of the company.