Salary slips to change, know the new salary structure from the 2022-23 financial year
The new wage code is expected to come into effect in the next fiscal year, 2022-23. According to the media, the new remuneration code will come into effect after April 2022. The base salary must represent at least 50% of the net cost to the company according to the new standards (CTC). The pay structure of the private working class should change drastically as a result.
In the Wage Code Bill 2019, the definition of “salary” has been amended. Changes in the Provident Fund contribution, gratuities and other items are now unavoidable due to changes in base salary percentage. The fall in the net salary or in hand is the most direct effect. Employer contributions to the Provident Fund, on the other hand, are expected to increase.
The number of variables and allocations has decreased
The base salary must now be at least 50% of the CTC, according to the new rules. This proportion currently fluctuates between 30 and 40% of the total salary. The rest is covered by benefits such as HRA, telephone rates and newspaper subscriptions. As base salary increases, allowances decrease.
For example, if a person earns Rs 1 lakh per month, the basic salary was Rs 30,000 to 40,000, the rest being allowances. To stay within the 50% limit, the basic income must now be at least Rs 50,000, with allowances reduced accordingly.
Increase in provident fund, decrease in net salary
The PF is based on a proportion of your base salary. With the increase in base salary, the Provident Fund will also increase. The future of the employees will be secured, but more FPs will be retained from the total. This could have a negative influence on the net salary.
Changes in pay slip structure will also influence TDS calculations.
In addition to base salary, bonuses and part of the HRA, allowances are now tax-free. Taxes will inevitably increase in parallel with the increase in base salary (the taxable part). With the new adjustments, the non-taxable portion will be greatly reduced. It will be around 20 to 25%, compared to 50% or more previously.
Under the new wage rules, the tax on the HRA is also expected to increase significantly. Due to the base salary increase, HRA will also increase. It will increase the taxable portion of the HRA. However, this change will affect higher income earners more. Low-income people will not see a significant increase in their taxable income.
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