Wednesday, October 20, 2021
HomeLifestyleThe joy of a higher wage has been surpassed! Know how your...

The joy of a higher wage has been surpassed! Know how your pay stub will change as a result of the New-Wage Code

New Wage Code: Delhi: Despite the second wave of the Corona pandemic, many employers have raised employee salaries. If you believe that increasing your salary has resulted in an increase in your take-home pay, there is good news for you. Actually, your happiness isn’t going to last very long. In fact, after the new Wage Code is implemented, your take-home pay may decrease while your tax burden increases.

Allowances will need to be reduced.

An employee’s cost-to-company (CTC) is made up of three to four components. Basic income, HRA, retirement benefits such as PF, gratuity, and pension, and tax-saving allowances such as LTA and amusement allowance In the new wage legislation, allowances are no longer allowed to exceed 50% of the entire income. If an employee’s monthly income is Rs 50,000, consider the following scenario. So his basic income should be Rs 25,000, with the extra Rs 25,000 going to his allowances.

That is, organizations that previously kept the basic wage at 25-30% and supplemented it with allowances can no longer retain the basic income below 50%. In such a case, businesses will be forced to reduce various allowances in order to comply with the new pay code’s standards.

Read More: Customers of SBI, take note! Less amount in the account will be costly; if an ATM transaction fails, a penalty will be levied; prevent this situation

Will amass a larger sum of money for retirement

The employee’s basic income is closely related to the provident fund and gratuity. Obviously, as the base income rises, the contribution of these two components will rise as well. That is, the employee’s retirement fund will grow, but his take-home pay will fall, as a major portion of his pay will now go to PF and gratuity. Let’s look at an example to better grasp this. Assume an employee’s salary is Rs 1 lakh. His basic remuneration is Rs 30,000. Employees and employers each contribute 12-12 percent to the PF.

That is to say, both of them give Rs 3600. As a result, the employee’s monthly take-home pay was Rs 92800. However, if the base income is increased to Rs 50,000, the in-hand salary will be Rs 88000, resulting in a monthly reduction of Rs 4800. Similarly, the gratuity amount would rise.

Tax implications

The remuneration structure of employees will alter after the new wage law is implemented. Employees with higher salaries will have a higher tax liability as a result of this. Because all of their allowances must be included within the first 50% of CTC. Those with lower incomes, on the other hand, will pay less in taxes. Their PF contribution will grow, and they will be eligible for a tax deduction under section 80C on contributions up to 1.5 lakh, lowering their tax obligation.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Latest

Good News for JioPhone Next Buyers! People were shocked after hearing the news

Jio Phone Next is going to be launched soon. Prior to that, the phone has appeared on Google Play Console with some key specs....

5 Superhit Schemes of LIC MF! Get your money double in just 5 years, have you invested the money?

If you want a safe investment, then LIC's subsidiary LIC Mutual Fund is the best for you in the asset management sector. This company,...

Apple company launched new AirPods and laptops

Apple company on Monday launched a new model of AirPods and MacBook Pros of laptops. On this, the rival company Samsung has enjoyed it. Washington: Apple...

T20 World Cup 2021: This player will prove to be the ‘X Factor’ of Team India, after 14 years, the country will win the...

Team India will face Pakistan in the first match of the T20 World Cup 2021. This year Team India is the biggest contender to...

Astrology: These zodiac signs have a lot of money luck, so see if you’re one of them

In terms of money, people born under the four zodiac signs are extremely fortunate. They never have to worry about running out of money...

Subscribe

* indicates required