* Figures marked with an asterisk are yet to be confirmed by a registered Chartered Accountant of India.
Stop 2 of 7
Gross and net pay
Why less reaches your bank
GROSS PAY, FOR THE YEAR
Everything your employer agrees to pay you for the year's work, before anything is taken out — basic pay, house rent allowance, other allowances, bonus.
NET PAY, FOR THE YEAR
What actually reaches your bank account over the year, after deductions. Also called take-home pay or in-hand pay.
The gap is gross minus net. Some of the gap is money that goes to the government (taxes); some of it is still yours, just saved for later (like provident fund).
Income tax slabs work on a whole year's income, so this lesson talks only in yearly amounts. Your salary slip shows one month — multiply by 12 for the year.
Guess, then see what actually happens
Arjun's employer pays him ₹14,40,000 for the year.
How much do you think reaches his bank?
₹13,00,000
₹10,00,000₹14,40,000
Think about PF, professional tax and income tax — then tap Show me.
Here's what actually happens
GROSS, FOR THE YEAR₹14,40,000
NET, FOR THE YEAR₹12,77,460*
NET PAY, FOR THE YEAR
₹12,77,460*
Gap ₹1,62,540*
You guessed ₹13,00,000 — ₹22,540* more than Arjun's net pay of ₹12,77,460*.
Every layer is something taken out of Arjun's pay. Tap a chip below to add or remove it, and watch the glass change.
GROSS, FOR THE YEAR(your payslip's gross, not CTC)
₹14,40,000
THE GAP
₹1,62,540*
NET, FOR THE YEAR
₹12,77,460*
WHERE IT WENT
Still yours — saved for later, but locked away₹72,000
Taxes and compulsory contributions₹90,540*
STILL YOURS — SAVED FOR LATER, BUT LOCKED AWAY
TAXES AND COMPULSORY CONTRIBUTIONS
Income tax deducted at source (TDS)₹88,140*
The amount deducted from your pay (TDS) is your employer's own estimate for the year, so it can differ from your final tax bill — for example if you choose the old regime, or have other income.
Provident fund, voluntary PF, your own NPS contribution and professional tax would lower your income tax only under the old regime — this is reported but not yet confirmed. See the Deductions lesson. Under the new regime, used here, switching them on or off doesn't change income tax.
INSURANCE
ESI (Employees' State Insurance)Not applicable
Only for lower-paid employees; Arjun's pay is above the limit, so it doesn't apply to him.
RECOVERIES
PAY NOT EARNED
This shrinks gross pay itself. Tax is worked out on what you actually earn, so income tax falls too (PF kept the same here for simplicity — in real life it usually falls a little too).
Gross pay for the year, on Arjun's payslip, is ₹14,40,000. Taken out: Provident fund (PF / EPF) — employee's share ₹72,000 (sample); Professional tax ₹2,400 (sample); Income tax (TDS) ₹88,140*. Net pay for the year is ₹12,77,460*.
Why gross and net are different
11 reasons Arjun's take-home pay is smaller than his gross pay. Tap a card to flip it.
Check yourself
Arjun's provident fund is taken out of his gross pay every year. Is that money gone?
Correct
Correct. PF isn't a tax — it's Arjun's own money, saved for later, with rules on when it can be taken out.
Arjun takes a sample unpaid leave that costs him ₹14,400 of gross pay. What happens to his income tax for the year?
Correct
Correct. For Arjun, a smaller gross means slightly less income tax too — tax is worked out on what he actually earns: ₹85,890* instead of ₹88,140*.