Gross salary is the figure in your contract before deductions; net salary is what actually reaches your bank account after tax and contributions.
Gross salary is what your contract says. Net salary is what reaches your bank account. The gap between them is routinely 20% to 35%, which means a job advertised at 60,000 might actually pay you closer to 43,000 to spend. This guide explains exactly what gets subtracted along the way, walks through a full worked example, and covers the extra layer that catches people out in South Asia and the Gulf, where offers are quoted as cost to company rather than gross pay. If you are comparing two job offers or working out whether a salary covers your rent, this is the number that matters. The CalcRange Take-Home Pay Calculator converts gross to net once you know your deduction rates.
Gross, Net, and the Words in Between
Gross salary is your total agreed pay before anything is taken out. It is the figure in the job advert, the offer letter, and the top line of your payslip.
Net salary, also called take-home pay, is what remains after every deduction. It is the amount that actually arrives, and the only figure that can pay rent.
Two related terms cause confusion. Basic salary is often only a component of gross pay in systems that split compensation into basic plus allowances, so basic is usually lower than gross. And taxable income is gross minus whatever your tax system allows you to deduct before calculating tax, which means it sits between the two and matches neither.
What Comes Out of Your Pay
The specifics differ by country, but deductions fall into a few predictable groups.
Income tax
Usually the largest single deduction, and usually progressive, meaning it rises in bands as income increases. Because of how bands work, the percentage you actually pay is lower than your top bracket suggests, which our guide on marginal versus effective tax rates covers in detail.
Social security contributions
Called national insurance, social insurance, EPF, provident fund, or payroll tax depending on where you are. These fund pensions, healthcare, and unemployment support. They are frequently charged at a flat rate up to a ceiling, and they are easy to forget because they are less discussed than income tax while often costing nearly as much.
Pension and retirement contributions
Your own contribution to a workplace or state pension. Worth noting that this reduces your take-home pay without reducing your wealth, since the money is still yours. In many systems it is also deducted before tax, so contributing more lowers your tax bill.
Everything else
Health insurance premiums, student loan repayments, union dues, salary-sacrifice arrangements, and any repayments for salary advances or company loans. These vary enormously between employers and countries.
The Calculation
Net salary = Gross salary – income tax – social contributions – pension – other deductions
There is no universal percentage to apply, which is why generic “take-home pay” figures found online are close to useless. The rate depends on your country, your income level, your filing status, and often your city or state.
What you can do is work out your own effective deduction rate once, then reuse it. Divide your total monthly deductions by your gross monthly pay. Once you know that number, converting any future salary offer takes seconds.
Worked Example
Gross salary of 60,000 per year, which is 5,000 per month. The rates below are illustrative rather than any particular country’s.
| Item | Rate | Monthly |
|---|---|---|
| Gross pay | 5,000 | |
| Income tax | 15% effective | −750 |
| Social contributions | 8% | −400 |
| Pension | 5% | −250 |
| Net pay | 3,600 |
Total deductions come to 1,400, an effective rate of 28%. Annual take-home is 43,200 against a headline salary of 60,000.
The pension line deserves a second look. That 250 a month is still your money, sitting in a retirement account rather than your current account. Your spendable income is 3,600, but your total compensation was never really 3,600, and someone comparing two jobs purely on take-home would undervalue the one with better pension terms.
Convert Your Own Salary
Enter your gross figure and deduction rates into the CalcRange Take-Home Pay Calculator to see net pay across annual, monthly, weekly, and hourly views. To model the tax portion specifically, use the income tax calculator, and our guide on converting hourly pay to annual salary covers getting to the gross figure in the first place.
Cost to Company: The Third Number
Across India, Pakistan, and parts of the Gulf and Southeast Asia, offers are commonly quoted as CTC, or cost to company. This trips up almost everyone seeing it for the first time, because CTC is not your salary.
CTC is the total annual cost of employing you. Alongside your gross pay it can include the employer’s own social security or provident fund contribution, gratuity provisions, insurance premiums, and sometimes notional benefits like a car allowance or subsidised meals. None of that passes through your bank account.
So the stack runs CTC, then gross, then net, each smaller than the last. Someone offered 12 lakh CTC might have a gross salary nearer 10.5 lakh and take home somewhere around 8.5 lakh depending on their tax position. The headline number and the spendable number can differ by close to 30%.
The practical move when you receive a CTC offer is to ask for a full breakdown showing which components are employer contributions and which are your gross pay. Any reasonable employer will provide it, and comparing two offers on CTC alone is comparing two differently constructed numbers.
Comparing Offers Properly
Take-home pay is the right starting point and the wrong finishing point.
Compare net pay first, since that is what funds your life. Then add back what you are actually receiving in other forms: employer pension contributions are real money you own, health insurance has a real replacement cost, and paid leave has a straightforward value in days.
Then adjust for what the job costs you. Commuting, relocation, required equipment, and unpaid overtime all reduce the true value of a package. A role paying 5% more that adds ninety minutes to your daily commute is frequently the worse offer once you convert the time into an hourly rate.
One warning worth stating plainly: do not compare a gross figure in one offer against a net figure in another. It sounds too obvious to mention, and it happens constantly, particularly when one offer is quoted as CTC and the other as monthly take-home.
Frequently Asked Questions
What is the difference between gross and net salary?
Gross is your total pay before deductions, the figure in your contract. Net is what remains after income tax, social contributions, pension, and any other deductions, and it is what actually arrives in your account. The gap is commonly 20% to 35%.
How do I calculate my net salary?
Subtract every deduction from your gross pay: income tax, social security or national insurance, pension contributions, and anything else on your payslip. If you already have a payslip, the faster route is dividing your total deductions by your gross to get your personal effective rate, then applying it to any new figure.
Is CTC the same as gross salary?
No, and the difference is significant. CTC includes the employer’s own contributions and benefit costs on top of your gross pay, so it is always the largest of the three numbers. Ask for a component-by-component breakdown before treating a CTC figure as your salary.
Why is my take-home pay different each month?
Common causes are overtime or bonuses pushing you temporarily into a higher tax band, reaching an annual ceiling on social contributions so that deduction stops mid-year, changes to pension contribution rates, or one-off items such as a benefit adjustment. Comparing two payslips line by line usually identifies it quickly.
Do pension contributions reduce my tax?
In many systems, yes. Where contributions are taken before tax is calculated, they reduce your taxable income and therefore your tax bill, meaning a 100 contribution costs you less than 100 in take-home. The treatment varies by country, so check your local rules.
Should I negotiate on gross or net salary?
Negotiate on gross, because that is the figure employers control and the one written into contracts. Your net depends on your personal tax position, which the employer cannot change. Calculate the net implications yourself so you know what a proposed increase is actually worth.
Why do two colleagues on the same gross salary take home different amounts?
Different pension contribution rates, different tax codes or allowances, student loan repayments for one and not the other, different filing or marital status where that affects tax, or different benefit elections. Identical gross pay rarely produces identical net pay.
The Bottom Line
Gross is the headline and net is the reality, with income tax, social contributions, and pension usually accounting for a quarter to a third of the difference. Work out your own effective deduction rate once from a payslip and every future offer becomes a five-second calculation. If your offer is quoted as CTC, treat it as a third and larger number again, and ask for the breakdown before comparing it with anything. Convert your figure with the take-home pay calculator, then judge offers on net pay plus the benefits you actually receive.
Financial disclaimer: This information is provided for general educational purposes and is not tax or financial advice. The deduction rates used above are illustrative examples, not the rates of any specific country. Tax rules, social contribution rates, thresholds, and payroll practices vary by jurisdiction and employer and change frequently. Verify current rules with your national tax authority, your payroll department, or a qualified professional.
Last reviewed: August 2026. Recommended editorial review: every 12 months.
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