From Gross to Net: How INSS and Income Tax Cut Your Salary

Gross salary vs. net salary

Your gross salary is the number on the contract — the agreed figure before anything is taken out. Your net salary is what actually lands in your account at the end of the month. Between the two sit mandatory deductions (which the employer is legally required to withhold) and agreed deductions such as transport vouchers, health plans and advances. The gap is not small: for anyone earning above the exemption threshold, it easily tops 20% of the gross.

Almost all of that gap comes from two deductions: the INSS contribution (Brazil's social security) and the IRRF, income tax withheld at source. Both are progressive — higher earners pay a bigger slice — and both are calculated band by band, not as a single rate on the whole amount. Getting the order of operations right is the difference between guessing your payslip is wrong and checking it with confidence.

The progressive INSS table

INSS for a formally employed worker is withheld in bands, like a staircase. Each slice of your salary is taxed at its own rate — not at the rate of the highest band you reach. The reference values (2024 table) are:

R$ 7,786.02 is the ceiling: earn above it and the deduction caps at R$ 908.86, the maximum sum of the four bands. Here is how the band math works for a R$ 3,000 salary:

• Band 1: R$ 1,412.00 × 7.5% = R$ 105.90
• Band 2: (R$ 2,666.68 − R$ 1,412.00) × 9% = R$ 1,254.68 × 9% = R$ 112.92
• Band 3: (R$ 3,000.00 − R$ 2,666.68) × 12% = R$ 333.32 × 12% = R$ 40.00
• Total INSS = R$ 258.82

Notice the effective deduction was 258.82 ÷ 3,000 = 8.63%, not 12%. Applying the top band's rate to the whole salary (12% × 3,000 = R$ 360) overshoots by more than a hundred reais. That is why it is worth checking the figure with the INSS Calculator, which sums the bands for you automatically.

Income tax (IRRF) and how the tax base is built

Withholding income tax follows the same band logic, but with a twist that trips people up: the tax base is not the gross salary. To reach it, you first subtract the INSS and, if applicable, a fixed amount per dependent (R$ 189.59 each) plus any court-ordered alimony. Only then do you apply the table:

The "amount to subtract" column is a mathematical shortcut. Instead of adding band by band as with INSS, you multiply the base by your band's rate and subtract the fixed amount — the result is identical to the full progressive calculation, just in one line. For example, a base of R$ 3,000 falls in the 15% band: 3,000 × 15% − 381.44 = 450 − 381.44 = R$ 68.56 of income tax.

The simplified deduction

Since 2023 there has been an alternative: instead of deducting INSS, dependents and alimony, you can subtract a flat simplified deduction of R$ 564.80 straight from the gross. Payroll compares both paths and applies whichever yields less tax — people with few deductions usually benefit from the simplified one. The Brazilian Personal Income Tax Calculator (Monthly) tests both options and shows which comes out cheaper.

Other common deductions (transport, meals, health plan)

INSS and income tax are mandatory, but a payslip usually carries more lines. Agreed deductions come afterward and vary from one company to the next:

• Transport voucher (VT): the law allows withholding up to 6% of base salary to fund commuting. If the real cost of fares is lower than that 6%, the smaller amount is deducted.
• Meal/food voucher (VR/VA): usually a token employee co-payment, set by a collective agreement.
• Health and dental plan: the employee's share, when there is co-payment. It can later reduce annual income tax as a medical expense.
• Alimony: withheld from salary and — crucially — also subtracted from the income-tax base.
• Union dues: optional since the 2017 labor reform, withheld only if the employee authorizes it.
• Advances and draws: a mid-month advance, for instance, is settled at month-end.

These deductions come after INSS and income tax and do not change their base (alimony is the exception that lowers the tax base). In other words, they shrink your final net pay but not the tax itself.

A full worked example, gross to net

Let us put it all together with a real case. A gross salary of R$ 5,000.00, with 1 dependent and no other deductions.

1. INSS (by bands): 105.90 + 112.92 + 160.00 + (5,000.00 − 4,000.04) × 14% = 105.90 + 112.92 + 160.00 + 140.00 = R$ 518.82.
2. Income-tax base: 5,000.00 − 518.82 (INSS) − 189.59 (1 dependent) = R$ 4,291.59.
3. Income tax: the base lands in the 22.5% band, so 4,291.59 × 22.5% − 662.77 = 965.61 − 662.77 = R$ 302.84.
4. Net salary: 5,000.00 − 518.82 − 302.84 = R$ 4,178.34.

From R$ 5,000 gross, R$ 4,178.34 remained — a bite of R$ 821.66, or 16.4% of the gross, from mandatory deductions alone. Add a transport voucher (up to R$ 300, the 6% of R$ 5,000) or a health-plan co-payment and the net drops further. Rather than redo this whole chain by hand, the Net Salary Calculator links INSS, income tax and the remaining deductions on one screen and shows each step.

Frequently asked questions

Is INSS withheld on the gross or net salary?

On the gross (more precisely, on the contribution salary), subject to the ceiling. INSS is the first deduction in the chain; together with dependents, it builds the base on which income tax is later calculated.

How much does each dependent cut my tax?

Each dependent removes R$ 189.59 from the income-tax base (not from the tax directly). How much that saves depends on your band: in the 27.5% band, for instance, each dependent reduces the tax by 189.59 × 27.5% ≈ R$ 52.14 per month.

Why does my INSS deduction look smaller than my band's rate?

Because the rate does not apply to the whole salary. Each band taxes only the portion of your salary that falls inside it. The result is an effective rate always lower than the nominal one — someone in the 12% band usually pays closer to 9% of their salary in practice.

Is the 13th-salary bonus taxed the same way?

The 13th salary is subject to INSS and income tax, but it is taxed separately from the monthly salary — it is not added to the month's pay to push you into a higher band. That is why its deductions appear in their own calculation, usually on the December payslip.

Is the simplified deduction worth choosing?

It depends on your deductions. People with many dependents or alimony usually do better with the full method; those with few deductions tend to gain from the R$ 564.80 simplified deduction. Payroll automatically applies the cheaper path, but you can simulate both to confirm.