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New Wage Code: Salary Slips To Change From FY 2022-23. Know New Salary Structure, Taxable Income And Other Details Here
New Wage Code Basic Salary: According to new rules, the basic salary cannot be less than 50 per cent of the CTC. Currently, this ranges anywhere from 30 to 40 per cent of the gross salary.
New Delhi: The New Wage Code is all set to be implemented from the next financial year, i.e 2022-23. According to media reports, the new wage code can be implemented anytime after April 2022. According to the new rules, Basic Salary will be at least 50 per cent of the net Cost To the Company (CTC). This is expected to bring a plethora of changes in the salary structure of the private working class.
The meaning of ‘wage’ has been altered in the Wage Code Bill, 2019. Now, due to changes in the Basic Salary percentage, the changes in Provident Fund contribution, gratuity and other components are inevitable. The most immediate effect is the fall in take-home or in-hand salary. But, employers’ contribution towards Provident Fund is bound to increase.
Fall In Allowances And Variables
According to new rules, the basic salary cannot be less than 50 per cent of the CTC. Currently, this ranges anywhere from 30 to 40 per cent of the gross salary. The rest is covered by allowances like HRA, Telephone charges, Newspapers etc. Now, since the Basic Salary is increasing, the allowances will go down.
For example, if a person has a salary of Rs 1 lakh per month, earlier Basic Salary was Rs 30,000-40,000 and rest were the allowances. Now basic salary will be at least Rs 50,000 and allowances will have to come down in order to not exceed the 50 per cent limit.
Rise In Provident Fund, Fall In Take Home Salary
The PF is calculated as a percentage of the basic salary. Now with the rise in Basic Salary, the PF will also go up. This will secure the future of the employees but out of the total, more PF will be deducted. This might impact the take-home salary in a negative way.
The TDS calculations will also be impacted due to changes in the salary slip structure.
Increase In Taxes
The allowances, apart from Basic Salary, Bonus and some part of HRA, is non-taxable under the current rules. With the rise in the Basic Salary (the taxable part) the taxes are also bound to go up. The non-taxable part will shrink significantly with the new changes. It will range from 20-25 per cent, from earlier 50 or more per cent.
Under the new rules, the tax on HRA is also expected to rise significantly. Due to the rise in Basic Salary, HRA will also rise. This will increase the taxable part of HRA.
This change will, however, impact people with high income more. People will low income will not see a significant rise in their taxable income.
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