The Central government is expected to implement the New-Wage Code Bill 2021 from April 1, 2021. It means that if the new wage code comes into force from April 1, 2021, then the employees will not get more than 50 percent of their net monthly salary in form of allowance. This may change the existing monthly Provident Fund (PF) and gratuity contributions by employees. As per the provisions under the new system, the share of basic salary in CTC could be 50 percent or more.
Apart from this, it will affect the pay structure includes the take-home pay, PF and Gratuity of the employees.
This is likely to impact the high-income earners and High Net-worth Individuals (HNIs). Under the existing tax provisions, interest received/accrued from employee’s provident fund (EPF) is exempt from tax. However, the new rules will potentially impact employees in the high-income bracket or employees making large voluntary employee provident fund contributions.
Apart from Wage Code, Industrial Relations, Occupational Safety, Health and Working Conditions and Social Security Codes are also likely to be implemented.
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