Changes are going to have a direct impact on your pockets from April 1, 2021. Many rules will affect people through salary structure, EPF contribution, LTC vouchers to ITR filing. Since the government plans to implement the New Wage Code Bill 2021 from April 1, there could be a huge reshuffle in your salary.
Some of the major tax-related announcements in Budget 2021 are also going to come into effect from April 1, which means that ITR filing rules, EPF contribution and taxation rules will come into force from next month. Significantly, for the first time in the country’s 73-year history, changes are being made in the labor law in this way. The government claims that it will prove beneficial for both employers and workers. Let’s know what will change from April 1, 2021 ….
CTC may increase with basic salary
If the new Wage Code is implemented on 1 April, the wages will be at least 50% of the total wages. This means that the basic salary (basic salary and dearness allowance in government jobs) should be 50 per cent or more of the total salary from April. Today the basic salary of most companies is around 35% to 45%, this will be a change for them. Your CTC may increase along with your base salary when the new rules apply.
Salary will decrease and PF will increase
According to the new draft rule, the basic salary should be 50% or more of the total salary. Increasing the basic salary will increase the PF, which means there will be a cut in take-home or on-hand pay. Currently, 12 per cent of your basic salary now goes to PF. When the basic salary becomes 50 percent of the CTC, the contribution to the PF will also increase. For example, a person with a monthly CTC of Rs 40,000 will have a basic salary of Rs 20,000 and Rs 2,400 will go to a PF account.
LTC plan discount off
In 2020, due to the outbreak of COVID-19, the Center announced a relaxation in the Leave Travel Concession (LTC) scheme. This exemption allowed central government employees to claim income tax benefits on expenses incurred between October 12, 2020. By March 31, 2021 on the purchase of goods attracting a GST rate of 12 percent or more in lieu of travel expenses. This waiver will not be applicable from 1 April.
Retirement amount will increase
Increase in contribution to gratuity and PF will increase the amount received after retirement. This will make it easier for people to live a pleasant life after retirement. The salary structure of high-paid officers will undergo the biggest change and they will be the most affected due to this. Increasing PF and gratuity will also increase the cost of companies. Because they too will have to contribute more to the PF for the employees. The balance sheet of companies will also be affected by these things.
Working hours proposed to be 12 hours
The new draft law proposes to increase the maximum working hours to 12. The draft rules of the OSCH code also provide for the addition of between 15 and 30 minutes of overtime by counting 30 minutes of overtime. Less than 30 minutes are not considered overtime eligible in the current rule. Draft rules prohibit any employee from working continuously for more than 5 hours. Instructions to give employees a rest of half an hour after every five hours are also included in the draft rules.
Tax on PF interest
With effect from April 1, 2021, interest on employee contributions for provident fund exceeding Rs 2.5 lakh per year will be taxable. This is in line with the announcement made by Finance Minister Nirmala Sitharaman in his budget speech. This means that from 1 April, people who contribute more than 2.5 lakh rupees per year to the PF account will have to pay tax on the interest earned on the amount exceeding the limit of 2.5 lakh rupees.
ITR Filings for Senior Citizens
Senior citizens above the age of 75, who have pension and interest only as a source of income, will be exempted from filing income tax returns. Senior citizens above 75 years of age are not exempt from paying tax. However, they are exempted from filing Income Tax Return (ITR) if certain conditions are met. The exemption for filing income tax returns will be available only if the interest income is earned in the same bank where the pension is deposited.
TDS at a higher rate for non-filers
A new section 206AB will be inserted in the Income Tax Act as a special provision providing higher rates for TDS for non-filers of income tax returns. In addition, individual taxpayers will be given pre-filled income tax returns (ITR). The move is aimed at easing the filing of returns. The pre-filled ITR will have an automatic upload on the taxpayer’s income and other data.
