7th Pay Commission: The central government can implement the new wedge code from April 1, 2021. If this happens, your salary structure will also vary from PF contribution to gratuity and tax liabilities. At the same time, it recommended a minimum wage for employees. The minimum basic salary of the employees will be at least 50 percent of their total CTC. This new rule can also apply to the salaries of private sector employees. It is believed that your provident fund (PF) contribution will increase, but your take at home salary will decrease.
Take home salary may decrease
Gratuity will increase with PF contribution with the implementation of new wage code. That is, there can 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.
Staff allowance changes
Employees’ allowances such as Dearness Allowance (DA), House Rent Allowance (HRA), Traveling Allowance (TA) and other allowances shall not exceed 50 per cent of the net CTC under New-Wage Code Bill 2021. That is, if the CTC (Cost to Company) is 60,000 rupees, then your total allowance will not exceed Rs 30,000. The cabinet examined all 196 allowances and decided to exclude 51 of them while retaining 37.
Gratuity: 5 year limit will be removed
At present, gratuity is obtained after working for 5 consecutive years 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 per cent. In this, the central government has approved an increase of 4 percent, it has been increased to 21 percent.
Contribution to PF will increase
Right now 12 per cent of the salary is deposited in the PF. But after the implementation of the new labor law, the basic salary will be 50 per cent of the CTC, then the contribution to the PF will increase. For example, if someone gets a monthly CTC of Rs 60,000, then the basic salary will be Rs 30,000. In this context, the contribution of 12 percent will be more than before.
Tax free and taxable part of salary
According to 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.