Gross Salary

Posted in Human Resources Terms, Total Reads: 4061

Definition: Gross Salary

Gross Salary is the sum total of all the components of your remuneration/salary package. Gross salary is basically the salary which is without any deductions like income tax, PF, medial insurance etc. The gross salary is mentioned in the company's offer letter in the salary section which mainly enlist all the components of the pay package. The sum of all those individual components on a yearly or monthly basis is the gross salary.

From a CTC (Cost to company) perspective, gross salary is the PF (provident fund) and gratuity removed from the CTC. Hence, gross salary is a part of the compensation and benefits to the employee, and covers all components like basic salary, HRA, LTA, conveyance allowance, bonuses etc.

Gross Salary & CTC

Components of Gross Salary

The important components of gross salary include the following:

• Basic Salary- This component of gross salary is the base salary which you get.

• HRA (House Rent Allowance)- This component is towards the house rent of any employee & helps in saving taxes

• Leave Travel Allowance- This part of gross salary covers some travel costs of the employee & helps in tax exemption

• Conveyance Allowance- This covers the costs required to travel from home to work & back

• Retirals- Also referred as superannuation, these help as a pension for employee post-retirement

• Bonus- Performance or annual bonuses are also a part of the gross salary

• Others like Medical allowance, Provident Fund (PF) etc

Gross Salary Components

These components of the salary structure would determine the Gross Salary. Net Salary on the other hand is Gross Salary-Deductions like taxes, retirals etc, & therefore Gross Salary is greater than Net Salary. In some cases, some non-monetary components may also be included in the gross salary e.g. holiday trips etc.

Gross Salary Formula Calculation 

Gross Salary = CTC (Cost to Company) - EPF (Employee Provident Fund) – Retirals

Net Salary = Gross Salary – Deductions – INCOME TAX (TDS)

Gross Salary >= Net Salary

Gross Salary Calculation Example

Sarah's monthly pay package may be:

Basic Salary: $1000

TA/DA: $500

Conveyance Allowance: $200

Retirals: $300

Bonus: $800

Medical Allowance: $200

Hence, the Gross Salary in this case is sum of all the components: $3000

And the Net Salary would be Gross Salary without the retirals & taxes: $2800 - $300 – Income Tax- PPF.

Thus, the salary paid to the employee before any deductions is the gross salary.

Hence, this concludes the definition of Gross Salary along with its overview.


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