The changes will have a direct impact on your pockets from April 1, 2021. Many rules affect people through IT structure filing, wage creation, EPF contributions, LTC vouchers. As the government plans to enact the New Wage Code Bill 2021 from April 1, there will be a huge restructuring in your salary.
If the bank doesn’t finish work this week, you should wait until April 4, when there are plenty of holidays in April.
CTC may increase with base salary
If the new pay code is enacted on April 1, the pay will be at least 50% of the total wage. This means that the basic salary (basic salary and dearness allowance in government jobs) must be 50 percent or more of the total salary from April. The basic salary of most companies today is around 35% to 45%, which is a change for them. Your CTC may increase with your base salary when the new rules apply.
Salary will decrease and PF will increase
Under the new draft rule, the base salary must be 50% or more of the total salary. Increasing the base salary will increase PF, which means a reduction in take-home or on-hand pay. Currently, 12 percent of your basic salary now goes to PF. When the base salary is 50 percent of the CTC, the contribution to the PF also increases. For example, a person with a CTC of Rs 40,000 per month would have a base salary of Rs 20,000 and a PF account of Rs 2,400.
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LTC scheme discount
In 2020, due to the COVID-19 outbreak, the Center announced a relaxation in the Vacation Travel Discount (LTC) scheme. The exemption allowed central government employees to claim income tax benefits on spending between October 12, 2020. As of March 31, 2021, in the purchase of goods that attract a GST rate of 12 percent or more in exchange for travel expenses. This waiver does not apply from April 1.
Retirement Amounts Increase
Increase of gratuity and PF contribution will increase the amount received after retirement. This will make life easier for people after retirement. The biggest change is the salary structure of the highest paid officers and thus they are greatly affected. Increasing PF and gratuity also increases the cost of companies. This is because they too need to contribute more to the PF. The balance sheet of companies is also affected by these issues.
It is proposed that the working hours are 12 hours
The new draft law proposes to increase the maximum working time to 12. The draft rules of the OSCH code also provide for adding 15 to 30 minutes of overtime by counting 30 minutes of overtime. Under the current rule, less than 30 minutes is not considered an overtime entitlement. The draft rules prohibit any employee from working continuously for more than 5 hours. Instructions for giving employees half an hour rest after every five hours are included in the draft rules.
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Tax on PF interest
Effective April 1, 2021, interest on employee contributions of more than Rs 2.5 lakh per annum will be taxed on the future fund. This is in line with the announcement made by Finance Minister Nirmala Sitharaman in his budget speech. This means that people who contribute more than Rs 2.5 lakh per annum from April 1 to PF account will have to pay tax on interest earned above the limit of Rs 2.5 lakh.
ITR Filings for Senior Citizens
Senior citizens over the age of 75, who have a pension and interest only as a source of income, are exempt from filing income tax returns. Senior citizens over the age of 75 are not exempt from paying taxes. However, they are exempted from filing Income Tax Return (ITR) if certain conditions are met. The exemption is available for filing income tax returns only if interest income is earned at the same bank where the pension deposit is placed.
TDS at a higher rate for those who do not file
The new tax 206 AB will be included in the Income Tax Act as a special provision that provides a higher rate for TDS for those who do not file income tax returns. Additionally, individual taxpayers will be given pre-filled income tax returns (ITRs). This action aims to ease the filing of returns. Pre-filled ITR includes automatic upload on taxpayer income and other data.
