Salary structure, EPF contribution, Income Tax, LTC scheme - here's what will change from April 1
The govt is planning to implement New Wage Code Bill 2021 from April 1. An announcement was made by Finance Minister during Budget 2021.
This financial year is about to end and the government has planned some major changes from the next financial year which starts from April 1.
During the Budget 2021 presentation, Union Finance Minister Nirmala Sitharaman had made certain announcements, including changes in ITR for senior citizens, LTC vouchers, changes in salary structure, among others.
Here is a list of changes that will come in place from April 1.
1. Changes in basic salary
According to the new rules, the share of basic salary in your CTC should be 50 percent or more. If the basic salary is less than 50 percent in your salary details, then it is going to change soon. Your CTC may also increase along with your basic salary when the new rules are implemented.
2. Allowances capped at 50%
The figures for PF, Gratuity, Dearness Allowance, Travel Allowance and House Rent Allowance will all be changed. In the new labor law, there is a provision that all the allowances including dearness, travel and rent allowance will not be more than 50 percent in total.
3. Contribution to PF will increase
According to the current rules, 12 per cent of your basic salary now goes to PF. When the basic salary becomes 50 per cent of the CTC, the contribution to the PF will also increase. For exampke, for a person with a monthly CTC of Rs 20,000, Rs 10,000 will be the basic salary and Rs 1,200 will go to the PF account.
4. Ease in LTC rules
In 2020, the Centre had declared relaxation in the Leave Travel concession (LTC) Scheme due to the COVID-19 outbreak. The relaxation allowed the central government employees to claim income tax benefits on expenses made between October 12, 2020 to March 31, 2021 on purchase of items that attract GST rate of 12 per cent or more instead of travel expenses.
5. Change in Gratuity rule
New rules of gratuity have been made in the new labor laws. Right now, employees are entitled to gratuity after 5 years of continuous work in the same company, but in the new law, employees will be entitled to gratuity even if they have been employed for just one year.
6. DA Hike
Some media reports claimed that the Centre would announce a hike of 4 per cent in DA. Speculations are rife that the Centre would also make an announcement regarding DA restoration while announcing the DA hike due since January 2021. If the Centre decides so, then the existing 17% DA of a central government employee will jump to 25 per cent (17 + 4 + 4).