Personal finance

New Wage Code: Salaries to decrease, tax burdens to increase

–> Post the implementation of the new wage code, the entire salary structure of an employee will change


Updated: Aug 1, 2021, 07:13 PM IST

In the past year, many jobs were lost, salaries were cut, companies had to face losses, etc. but despite all this, there were many who also got increments and their jobs were safe. But in the process of increment if your take-home salary has been increased then here’s some important news for you. Soon, your increased salary will not only decrease but your tax burden will also increase after the implementation of the new Wage Code.

Every Cost-to-Company (CTC) has some components which determine the salary and its distribution for each individual. Now, the new wage code does not allow components like Basic Salary, House Rent Allowance (HRA), retirement benefits like Provident Fund (PF), gratuity, pension and tax-saving allowances like LTA and entertainment allowance to exceed more than 50 per cent of the total salary at any cost.

Basically, if an individual’s salary is Rs 50,000 per month, his basic salary should be Rs 25,000 and his allowances should come in the remaining Rs 25,000. Now, with the decrease of the salary, components that helped people later in life like PF or gratuity will also suffer because they are related to the salary, so if the salary decreases, their contribution will also decrease.

Post the implementation of the new wage code, the entire salary structure will change for an employee. Employees who enjoyed huge sums of money will face an increase in the tax.


Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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