The government needs your money, and they know how to take it. These changes are evident that it is going to hit the middle-class people who have salary-based incomes. From April 2021 the new wage rule changes the salary structure of people who are working in an organization with more than 20 employees. Basically, you will have less take-home salary.
Previously the pay structure was like 20 -30% of your CTC is your basic and the rest is divided with your HRA and allowance. This structure was followed so you and your employer will shell out less money on your PF (provident fund) and gratuity.
You and your employer contribution was at 12% of your basic pay ( which is 20% of your CTC)
Now, according to the new law, your allowance allocation should not be more than 50% of your CTC, that is your basic pay should be 50% or more.
So now you and your employee should shell out more on your PF contribution. Your PF contribution comes under your salary deduction which reduces your take-home salary.
They say it is an advantage for people because you will have a huge PF payout, but the real winner is the Government who gets more cash flow in their locker.
It is also a pinch to the employer because the cost to the company will increase in the new pay structure because of his part of the contribution to the PF.
Consider your have gross salary of Rs 25000 Per month ( your CTC per month)
| Salary Break up | Old Salary Structure | New Salary Structure |
| Basic pay (A) | Rs 7500 ( @ 30% of your CTC) | Rs 12500 (@ 50% of your CTC) |
| HRA (B) | Rs 7500 | Rs 8750 |
| Conveyance (C) | Rs 1250 | Rs 3750 |
| Other Allowance (D) | Rs 6250 | NA |
| Employer Contribution to PF (E) | – Rs 1800 ( 12% of A+C+D) | – Rs 1950 ( 12% of A+C+D) |
| Employee Contribution to PF | – Rs 1800 | Rs -1950 |
| Professional Tax | – Rs 200 | – Rs 200 |
| Take home after deducting PF Contribution | Rs 21200 | Rs 20,900 |
From the above, you can see that your deduction has increased in your PF contribution.
So they say the new law seems to care more about the welfare of the employees. Wish they could have reduced income ta and GST to show the real care on our own mango people.
Well we mango people don’t protest .
So you have to keep these deduction in mind before you say your expected CTC in your next job interview.
Stay tuned ….
