Along with many relaxations offered by the FM Nirmala Sitaraman in the finance bill, the most important ones are for the salaried class. The finance bill 2021 brought about a few changes which are going to be effective from 1st April,2021.
The new wage code bill shall have some impact on the taxable salary structure for individuals. There are a few other changes too.
Let’s have a precise look at the rules taking place from the next financial year :
Basic Salary to change-For salaried individuals, CTC may increase because of the new rules. Basic salary should comprise 50% or more of the CTC. If this change has not taken place already, then it will happen.
Dearness Allowance also to go up- There is a possibility that the existing DA of 17% will go upto 25% for the central govt employees. The 4% proposed hike shall be retrospectively effective from Jan 2021.
PF contribution to increase and interest to be taxed if the PF contribution crosses a certain amount- Currently the contribution to the PF is 12% of basic salary. Now if the basic salary itself is going to go up and shall form 50% of the CTC, naturally that will lead to an increased contribution to the PF.
Interest on annual employee contributions to PF over Rs.2.5 lakh would be taxed from 1st April, 2021. A person earning less than Rs.2 lakh per month will not be affected by this proposed change.
Ease in Gratuity rules- Until now the rule was that an employee has to work in a company for 5 years to be entitled to the gratuity scheme. So once he/she changed the job, they had to start afresh for counting 5 years to be eligible under gratuity rules. But in place of 5 years, now one has to complete just one year of employment in order to be eligible according to the new labour laws.
Alternative to LTC benefits- Salaried employees could not avail the LTC benefit because of the Covid-19 Pandemic. The central govt employees can alternatively claim this benefit by way of purchasing items attracting GST at 12% or more. These items need to be purchased between October 12, 2020 to March, 2021. Income tax benefits can be claimed by the central govt employees on such expenses.
Capping of allowances- Dearness allowances, travel and rent allowances shall not be allowed for more than 50% in total.
Senior Citizens above 75 years exempt from filing ITR-Senior citizens above the of 75 years whose income comprises only pension and interest income from fixed deposit accounts with the same bank.The bank will deduct the tax amount and deposit it.
Pre-filled ITR forms-Pre-filled income tax return forms shall come with details of salary income, tax payments, TDS, capital gains from listed securities, dividend income, interest form banks, post office etc.so as to make the process a lot easier by automatic upload of all data.
Higher TDS liability-For those who do not file an income tax return, a special provision 206B will provide for higher TDS.
Bhoi Smrutirekha Dharanidhar