New Wage Code: Due to the new wage code, there will be a change in salary structure along with PF contribution to gratuity and tax liabilities.
The central government can implement the new Wage Code from 1 April 2021 across the country. If this applies, your salary structure will also vary from PF contribution to Gratuity and tax donations. With this, according to the Wage Code Bill 2019, the definition of labor will also change. According to the new definition, the wage will mean at least 50 percent of the total salary of the employees. This new rule will also apply to the pay scale of private sector employees.
Take-home salary may be less
This will increase gratuity etc. with PF contribution and there may be a decrease in the take-home salary of the employees. Although the new code wedge may reduce your take-home salary, more money will be deposited in retirement benefit funds like PF, gratuity. This can prove to be better for your future financial security.
Rules will be changed for CTC
The CTC consists of three-four components like basic wage, HRA, and retirement benefits like PF, gratuity rules, NPS. The new wage code provides that the basic salary of employees will be at least 50% of the total CTC, which means that the monthly allowance will not exceed 50% of the total CTC. The amount of CTC is never equal to the take-home salary of the employee.
Change in gratuity
At present, gratuity is available after 5 years of continuous work in a company, but under the new law, employees will be entitled to gratuity after working only for 1 year. According to the 7th Pay Commission guidelines, the DA rate for central government employees is 17%. In this, the central government has approved an increase of 4%, which has been increased to 21%.
The tax-free and taxable part of the salary
As per the new rules, basic salary, special allowance, bonus, etc. are fully taxable. At the same time, allowances for fuel and transport, phone, newspaper, and books, etc. are completely tax-free. At the same time, HRA may be completely or some part of it free of tax. Also, NPS contribution equal to 10% of basic salary is also tax-free. At the same time, up to Rs, 20 lakh in gratuity is tax-free.