Quick answer: Gross salary is your total earnings before deductions: basic pay plus all allowances. Net salary (in-hand or take-home pay) is gross minus your PF, ESI, professional tax and TDS. CTC is larger than both, because it adds the employer's own costs such as employer PF and gratuity. So CTC > gross > net.
Gross, net and CTC are the three salary numbers every employee in India sees, usually without anyone explaining how they connect. This guide gives the meaning and formula for each, a worked example from CTC down to the bank credit, how to calculate gross from net (and net from gross), and which number to use for loans, tax returns and job offers. For the CTC side in depth, see our guide to CTC meaning.
Gross salary vs net salary vs CTC at a glance
| CTC | Gross salary | Net salary | |
|---|---|---|---|
| What it is | Employer's total cost | Earnings before deductions | Amount credited to your bank |
| Includes employer PF, gratuity | Yes | No | No |
| Includes your PF, PT, TDS | Yes | Yes | No, already deducted |
| Where you see it | Offer letter | Payslip, Form 130 | Payslip, bank statement |
| Usually quoted | Per year | Per month on payslips, per year in tax forms | Per month |
What is gross salary?
Gross salary is the total of all earnings paid to you through the payslip in a period, before any deduction. It includes basic pay, DA, HRA, special and other allowances, overtime, arrears and any bonus or incentive paid in that month. It does not include the employer's PF or ESI contribution or the gratuity provision, because those are not paid to you.
Gross salary formula: gross salary = basic + DA + HRA + other allowances + variable pay paid in the period.
From CTC, the formula runs the other way: gross salary = CTC − employer PF − employer ESI − gratuity − benefits and variable pay not paid in the month. Annual gross salary is the total for the year, so if you were paid a bonus or arrears, it will be more than 12 times your usual monthly gross.
What is net salary?
Net salary is what is left after deductions, and it is the same thing as in-hand salary or take-home pay. It is always after tax, because TDS is one of the deductions. (If you see "netto" and "brutto" in a foreign offer or payslip, they are the German and Dutch words for net and gross.)
Net salary formula: net salary = gross salary − employee PF − employee ESI − professional tax − TDS − other deductions (loans, advances, loss of pay already reflected).
Employee PF is 12% of PF wages, often restricted to ₹3,000 a month when wages are above the ₹25,000 ceiling. Employee ESI is 0.75% of wages where wages are ₹21,000 a month or less. Professional tax depends on your state, and TDS on your projected annual taxable income and tax regime.
Worked example: from CTC to net salary
An employee has a monthly gross salary of ₹50,000, with wages (basic, DA and special allowance) of ₹37,500. The employer pays PF on the ₹25,000 ceiling and includes gratuity in CTC. The employee is in the new tax regime with no other income, and their state charges ₹200 a month of professional tax at this salary (use your own state's slab).
| Monthly (₹) | Amount |
|---|---|
| CTC | 54,803 |
| Less employer PF (12% of ₹25,000) | 3,000 |
| Less gratuity provision (₹37,500 × 15 ÷ 26 ÷ 12) | 1,803 |
| Gross salary | 50,000 |
| Less employee PF | 3,000 |
| Less professional tax (example) | 200 |
| Less TDS | 0 |
| Net salary | 46,800 |
Why is TDS nil? Annual gross is ₹6,00,000. After the ₹75,000 standard deduction, taxable income is ₹5,25,000, and under the new regime there is no tax on taxable income up to ₹12 lakh because of the rebate (see the Income Tax Department for the current slabs and rebate). ESI does not apply because both wages and gross pay are above ₹21,000. To run your own figures, use the CTC to in-hand salary calculator.
If my gross salary is ₹25,000, what is my net salary?
It depends on your wages, state and tax regime, but here is a typical case. If ₹18,750 of the ₹25,000 counts as wages, employee PF is 12% of ₹18,750 = ₹2,250, and employee ESI applies because wages are under ₹21,000: 0.75% of ₹18,750 is ₹140.63, rounded up to ₹141. TDS is nil at this income in the new regime. Net salary is about ₹22,609, less your state's professional tax, if any.
One caution on ESI: testing coverage on wages rather than gross pay is the Labour Ministry's view in its FAQs on the Labour Codes. Some employers still test ESI on gross pay until ESIC notifies its new regulations; on that basis a ₹25,000 gross salary is outside ESI, and net salary would be about ₹22,750.
How to calculate gross salary from net salary
To work backwards (often called "grossing up"), add the deductions back: gross = net + employee PF + employee ESI + professional tax + TDS. The catch is that PF, ESI and TDS themselves depend on gross, so check the result.
Example: you want ₹40,000 in hand. Assume PF on the ₹25,000 ceiling (₹3,000), professional tax ₹200 and no TDS: gross = ₹40,000 + ₹3,000 + ₹200 = ₹43,200. Check: if three-quarters of gross counts as wages, wages are ₹32,400, above both the PF ceiling (so PF is ₹3,000) and the ESI limit (so no ESI); annual gross of ₹5,18,400 is well under the rebate limit, so no TDS. The answer holds.
Net salary formula in Excel
With gross salary in B2, employee PF in C2, ESI in D2, professional tax in E2 and TDS in F2, net salary is =B2-SUM(C2:F2). For PF capped at the ceiling, with wages in G2, use =ROUND(MIN(G2,25000)*12%,0). Our free salary sheet in Excel has these formulas built in for a whole team.
Which number to use, and when
- Job offers: compare CTC, but decide on fixed monthly gross and net. Variable pay and one-time bonuses inflate CTC without reaching you every month.
- Loans and rent applications: lenders and landlords may ask for net monthly salary (from your payslip and bank statement) or gross salary. Give whichever they ask for, with the payslip as proof.
- Income-tax return: use the annual gross salary from Form 130 (formerly Form 16), which includes taxable perquisites. This is different from "gross total income", which adds all your other income such as interest and rent before deductions.
- Budgeting: use net salary, because that is what you can spend.
Our Form 16 and Form 130 guide explains where gross salary appears in the certificate, and the salary slip guide explains every earnings and deduction line.
Why net salary is lower than gross, and gross lower than CTC
The gap between CTC and gross is the employer's own cost: employer PF, employer ESI, gratuity, insurance and variable pay not yet paid. The gap between gross and net is your own deductions: PF, ESI, professional tax and TDS. Under the new Labour Codes, both gaps can grow if more of your pay counts as wages, because PF and gratuity are worked out on wages; our basic salary guide explains why.
Related reading: CTC meaning · Flexible benefit plan · Salary structure in India · Basic salary · Salary breakup calculator
Need CTC, gross and net for a whole team? The salary calculation master combo includes an Excel calculator that works out all three under the new Labour Codes.
Frequently asked questions
Is CTC the same as gross salary?
No. CTC is gross salary plus the employer's own costs, such as employer PF, employer ESI, the gratuity provision and benefits. Gross salary is what appears as total earnings on your payslip, so CTC is always the larger figure.
Does the employer pay net or gross salary?
Both, in a sense. The employer credits net salary to your bank account and pays the deductions (your PF, ESI, professional tax and TDS) directly to the authorities on your behalf. Together these add up to your gross salary.
Is gross salary monthly or yearly?
Either. Payslips show monthly gross salary; offer letters, Form 130 and income-tax returns use annual gross salary. Annual gross is the year's total earnings before deductions, including any bonus or variable pay actually paid, so it is not always exactly 12 times the monthly figure.
Does gross salary include PF?
Gross salary includes your own PF, because employee PF is deducted from gross. It does not include the employer's PF contribution, which is paid on top of gross and counted in CTC.
Is income tax calculated on gross or net salary?
On neither directly. TDS is worked out on your taxable salary for the year: gross salary (with taxable perquisites) minus exemptions and the standard deduction your regime allows. It is then deducted from gross pay, which is one of the reasons net is lower.
Which is better to compare offers: CTC, gross or net?
Compare all three, but decide on fixed monthly gross and net. CTC can be inflated by variable pay, gratuity and one-time bonuses that you may not receive, while gross and net show what is actually paid each month.
Position as of 13 November 2026. Examples use the PF wage ceiling of ₹25,000 (from 17 September 2026), the ESI wage limit of ₹21,000, the new tax regime for tax year 2026-27 (₹75,000 standard deduction, rebate up to ₹12 lakh taxable income) and an illustrative ₹200 professional tax. Professional tax and minimum wages differ by state, so check your state's rules. General information, not legal or tax advice.