In Indian Payroll, the salary structure of an employee has several components such as CTC, Gross Salary, Net Pay that is also known as Take home Salary, etc. Net Pay is the salary paid to an employee after deductions being subtracted from gross salary. It is the final amount of money an employee takes home mostly every month.
Gross Salary is the amount received after Gratuity and EPF are deducted from CTC (Cost To Company- Package offered to an employee). It is the amount before deductions and includes bonuses, overtime, and other differentials.
Net Salary = Gross Salary (-) Income Tax (-) Public Provident Fund (-) Professional Tax
PPF (Public Provident Fund) and EPF (Employee Provident Fund) is a specified percentage of the employee’s salary, mostly, no less than 12% of the basic salary. Whereas, gratuity is a percentage of the basic salary, typically 4.81% of the employee’s basic salary.
Thus, an employee’s net pay/take-home pay should ideally look like-
Take-Home Pay / Net Salary = Direct benefit (-) deductions (taxes, PF etc.)