DIFFERENCE BETWEEN NEUTRAL AND EARTH: The grounding of electrical equipment is probably one of the least understood aspects of electricity. As the characteristics of electrical equipment changes from linear to non-linear, the nature of grounding expands from the task of ensuring the safety of personnel to ensuring that one type of electrical equipment does not interfere with other types of electrical equipment. One point for confusion rests with the often interchanged terms of Neutral and earth.
Neutral:
Neutral is a return path for an AC circuit which is supposed to carry current in normal condition. This current may be because of many reasons, primarily because of phase current imbalance and some time because of 3rd and 5th harmonics also.
There may be others reasons too but the magnitude of this current is in a fraction of phase current and in few cases, it can be even double of phase current. So Neutral wire is always assumed to be charged (in the active circuit). This neutral wire is given to ground (by grounding) to make the second terminal of neutral wire at zero potential.
Earth:
The ground wire is a normally non-current carrying conductor, designed to carry the electrical energy should a fault occur. This normally non-current carrying conductor is also bonded to every exposed metallic part in your structure, to ensure that there are no hazardous differences in potential on the objects you touch. You should be able to touch exposed ground wires with no concern, although all exposed wires should always be treated as live and dangerous.
The reason for the neutral wire is to carry electrical currents back to the transformer during normal operations, in a manner that keeps those hazardous electrical currents away from people and exposed metal objects.
