Gross Salary: Meaning, Formula, Components and Calculation

Gross salary, cost to company and take-home salary, are not just different names for salaries. There is a lot of difference between these three, about which we would learn in this guide.

CTC meaning

Cost to company (CTC) is the amount which a company will have to bear on an employee for a specific year. In other words, CTC indicates the cumulative amount a company spends on an employee in a year. Note that the company’s CTC will always be higher than your gross and take-home salaries as it has more components than gross salary or take-home salary.

Components of CTC

• Basic salary
• House rent allowance
• Dearness allowance
• Medical allowance
• Entertainment allowance
• Conveyance allowance
• Other allowances
• Allowance towards mobile, internet, utility bills
• Educational allowance
• Salary arrears
• Remuneration
• Overtime payment
• Performance-lined bonus
• Cash awards
• Gratuity
• Contributions towards Provident Fund (PF)
• Payments of professional tax
• Deductions as income tax

See also: All about City Compensatory Allowance or CCA

CTC calculator

CTC = Direct Benefits + Indirect Benefits + Savings Contributions 

What is gross salary? 

Your gross salary is the amount before any deductions are made from it. It includes all components of your salary, barring pension fund contributions like EPF, gratuity, etc.

See also: All about TDS on salary

Gross salary components

1. Basic salary
2. House rent allowance
3. Conveyance allowance
4. Medical allowance
5. Dearness allowance
6. Special allowance
7. Leave travel allowance
8. Allowance towards mobile, internet, utility bills
9. Educational allowance
10. Salary arrears
11. Remuneration
12. Overtime payment
13. Performance-lined bonus
14. Cash awards

Also read: Salary slip format: Everything you need to know

Gross salary calculation

see about Gross salary calculator

Gross Salary = Basic Salary + HRA + other allowances

Take-home salary meaning

Your take-home salary or net salary is the amount that gets credited into your account, once tax is deducted and contributions towards savings like PF and gratuity are made. As a result, it is much lower than your CTC or gross salary.

Take-home salary calculator

Take-home salary = Gross Salary – Income Tax – Public Provident Fund – Professional Tax

Difference Between Gross Salary and Basic Salary

Your salary has several components. The basic salary is that fixed amount which your employer pays you in exchange for your work. Basic salary does not include any fringes and perks like HRA, LTA, insurance, bonus, etc. It also does not include any tax deductions.  Your gross salary on the other hand is the salary amount before any deductions. Gross salary includes all components of your salary, barring pension fund contributions like EPF, gratuity, etc.