Gross vs. Net

Gross refers to the whole of something, while net refers to a part of a whole following some sort of deduction. For example, net income for a business is the income made after all expenses, overheads, taxes, and interest payments are deducted from the gross income. Similarly, gross weight refers to the total weight of goods and its packaging, with net weight referring only to the weight of the goods.

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Meaning The term gross refers to the total amount made as a result of some activity. It can refer to things such as total profit or total sales. Net (or Nett) refers to the amount left over after all deductions are made. Once the net value is attained, nothing further is subtracted. The net value is not allowed to be made lower.
Taxation Salaried people now pay income-tax on their gross income as per Income-Tax Act of 1961. Businesses and self-employed persons pay tax on their net income as per Income-Tax Act of 1961.
Gross vs Net Income Gross income is calculated by subtracting the cost of goods sold from revenue. Net income is calculated by subtracting expenses such as SG&A (selling, general and administrative expenses), interest payments and taxes from gross income.
Gross vs Net Margin Gross margin = Gross income as a percentage of revenue Net margin = Net income as a percentage of revenue
Gross vs Net Weight In the context of weight, gross refers to the weight of the product and the packaging. In the context of weight, net refers to the weight of the actual product (without the packaging).

Gross vs. Net in Economics

In economics, "gross" means before deductions, e.g., Gross Domestic Product (GDP) refers to the total market value of all final goods and services produced within a country, in a given period of time, usually a calendar year. Net Domestic Product (NDP) refers to the Gross Domestic Product (GDP), minus depreciation on a country's capital (economic) goods. (The NDP is thus, in effect, an estimate of how much the country has to spend to maintain its current GDP.)

Gross vs. Net in Accounting

See Income vs Revenue

Gross vs. Net Income

In accounting, gross profit, gross income, or gross operating profit all refers to the difference between revenue and the expense of providing a service or manufacturing a product, prior to deducting overheads, payroll costs, taxes, and payments on interest. Net profit, on the other hand, is the gross profit, minus overheads and interest payments and plus one-off items for a certain period of time.

In the UK, the VAT (a "value added tax" that is a sales tax) is only included in a "gross" amount; the "net" amount is calculated before tax.

Gross Margin vs Net Margin

Gross margin is the ratio of gross profit to revenue. Net margin is the ratio of net profit to revenue.

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Comments: Gross vs Net

Anonymous comments (5)

July 7, 2011, 10:44am

Thanks for a very clear and informative article.

Just to expand on the below comments; it's simply a question of algebra, to decrease a value by 25% one could multiply the value by 0.75 (1 - 0.25), so to get back to the original, just divide by 0.75.

Took two years before that correction was made, hopefully no one used the first incorrect method...

— 85.✗.✗.70

September 23, 2012, 4:15pm

actually, it's arithmetic not algebra, but let's not split hairs.

— 65.✗.✗.250

October 28, 2011, 3:02pm

As a quick way to remember that Gross comes before Net..just remember 'G' comes before 'N'

— 70.✗.✗.51

July 7, 2011, 3:28pm

That's right. It's simple algebra. Tax rate is 25%. Tax is applied to gross income and what's left after tax is net income. So net income is 75% (100% - 25%) of gross income. Let's say gross income is X. So Net income = 0.75 * X. We know that net income is $100. So 0.75 * X = 100. So X = 100 / (0.75)

— 24.✗.✗.203

February 24, 2011, 12:43am

no you would divide by .75. Dont listen to the uneducated person below

— 208.✗.✗.3


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