Net Salary / Take-Home Pay

What Is Net Salary?

Net salary, also called take-home pay, is the final amount credited to an employee’s bank account each month. It is calculated by subtracting all employee-side deductions from gross salary—including income tax (TDS), provident fund contribution, ESI contribution, professional tax, and any voluntary deductions.

How Net Salary Is Calculated

Net Salary = Gross Salary − Employee PF − Employee ESI − Professional Tax − TDS − Voluntary Deductions

Deductions That Reduce Gross to Net

Deduction	Rate / Amount	Applicability
Employee PF	12% of basic + DA	All employees earning basic ≤ ₹15,000/month (mandatory); optional above
Employee ESI	0.75% of gross wages	Employees earning ≤ ₹21,000/month
Professional Tax	₹200/month (max)	State-specific; most states cap at ₹2,500/year
TDS (Income Tax)	As per tax slab	Based on projected annual income minus exemptions
Voluntary deductions	Varies	VPF, NPS, meal coupons, insurance premiums

Calculation Example

For an employee with gross salary of ₹80,000/month and basic salary of ₹40,000/month:

Item	Amount (₹)
Gross Salary	80,000
− Employee PF (12% of ₹40,000)	−4,800
− Professional Tax	−200
− TDS (estimated at old regime)	−5,200
Net Salary (Take-Home)	69,800

Under the new tax regime (FY 2025–26), TDS would differ based on the revised slabs with standard deduction of ₹75,000.

Old Regime vs New Regime Impact on Take-Home

Factor	Old Regime	New Regime (2025–26)
Standard deduction	₹50,000	₹75,000
HRA exemption	Available	Not available
80C deduction	Up to ₹1.5L	Not available
Tax slabs	Higher rates, more exemptions	Lower rates, fewer exemptions
Better for	High deduction claimers	Employees with fewer investments

Key Points

• Net salary varies month to month if performance bonuses, overtime, or arrears are included in a particular month.
• TDS is estimated annually and divided into monthly deductions. Any over/under deduction is adjusted in the final months or via ITR filing.
• Professional tax is deducted in most Indian states (Maharashtra, Karnataka, West Bengal, etc.) but not in Delhi or Rajasthan.
• ESI stops once monthly wages cross ₹21,000—the employee exits the ESI scheme.

How Omnivoo Handles Net Salary

Omnivoo’s payroll system calculates precise net salary each month by:

• Automated TDS computation: Projects annual income, applies the chosen tax regime (old or new), accounts for declared investments under 80C/80D, and deducts the correct monthly TDS.
• Real-time payslip visibility: Employees see a clear breakdown of gross-to-net on their self-service portal before payday.
• Investment declaration workflow: Employees submit tax-saving declarations through Omnivoo, which automatically adjusts TDS for subsequent months.
• Multi-state professional tax: Omnivoo applies the correct professional tax slab based on the employee’s work state, handling state-specific rates and thresholds.
• Year-end reconciliation: At financial year end, Omnivoo reconciles actual vs projected deductions and generates Form 16 with accurate figures.