Salary Structure in new wage code: New wage codes are not implemented yet. But, the discussion about the changes taking place in it has been going on for a long time. The atmosphere is tight, especially regarding the salary structure.
In hand salary will be less, retirement savings will increase and tax will also be cut heavily. There are many such things. But, understanding the structure reveals something else.
New Wage code: In hand salary will be reduced, due to 50% of basic, tax will be deducted more, allowance money will be reduced… You must have heard many such things when it comes to New Wage Code. Not implemented yet. But, based on the basic information, it is believed that there will be an impact on the pockets of the job seekers. The date of implementation of the New Wage Code has not been revealed yet. But, it is being discussed for the last two years. It is certain that there will be a change in your salary after its implementation. But, it is important to understand what will happen in the salary structure.
What is the ruckus about salary in New Wage?
The central government has made 4 new labor codes by adding 29 labor laws. These are named as New Wage Codes. There is a provision in the Wage Code that in the salary that companies will pay to their employees, the share of basic salary will be 50 percent of the total salary (CTC). At present, the basic salary ranges between 30-35%. In the current structure, the reimbursement (allowance) portion is more. There are allowances like Leave Travel Allowance (LTA), Overtime and Conveyance allowance.
How to understand your salary structure?
Suppose the monthly CTC (Cost to Company) of an employee doing a job is Rs 1.5 lakh i.e. annual package of Rs 18 lakh and you can take maximum tax exemption of Rs 1.50 lakh on investment under section 80C. If the company is giving you the benefit of National Pension Scheme (NPS) under section 80CCD(2), then according to the rules, 10% of the basic salary goes to NPS and it is tax free.
Now understand how to get in hand money
In the current salary structure, the basic salary is 32% of the CTC. In this sense, in the monthly CTC of 1.50 lakh, the basic salary will be Rs 48,000. Then 50 percent i.e. Rs 24,000 HRA then 10% of basic (Rs 48,000) in NPS i.e. Rs 4,800 will go. If 12% of the basic salary goes to the Provident Fund (PF), then Rs 5,760 will go to the EPF every month. In this way your monthly CTC of Rs 1.50 lakh has become Rs 82,560. This means that the remaining Rs 67,440 is being given through other items. These include components like special allowance, fuel and transport, phones, newspapers and books, monthly share in annual bonus, gratuity.
Whose share in the current salary structure
| Income | Monthly | annual |
| basic salary | Rs 48,000 | Rs 5,76,000 |
| HRA | Rs 24,000 | Rs 2,88,000 |
| special allowance | Rs 37,636 | Rs 4,51,632 |
| PF Contribution | Rs 5,760 | 69,120 rupees |
| NPS Contribution | Rs 4,800 | 57,600 rupees |
| fuel and transport | Rs 16,000 | Rs 1,92,000 |
| Phone | 2,000 rupees | Rs 24,000 |
| newspaper books | 1,500 rupees | Rs 18,000 |
| Bonus (Annual) | 8,000 rupees | Rs 96,000 |
| Gratuity | Rs 2,304 | Rs 27,648 |
| total salary | Rs 1,50,000 | Rs 18,00,000 |
How much will be in hand salary, how much tax will be deducted?
- Out of your total CTC, Rs 1.10 lakh will be taxed. Meaning only 6.14 per cent of CTC will go to tax.
- Take home salary will be Rs 1.14 lakh. 76.1 percent of the total CTC is in hand salary.
- Retirement savings – Rs 1.96 lakh, totaling 10.9 percent of CTC.
Salary structure on implementation of new wage code
| income | Monthly | annual |
| basic salary | 75,000 rupees | 9,00,000 rupees |
| HRA | 37,500 rupees | Rs 4,50,000 |
| special allowance | , | , |
| PF Contribution | 9,000 rupees | Rs 1,08,000 |
| NPS Contribution | Rs 7,500 | 90,000 rupees |
| fuel and transport | 10,000 rupees | Rs 1,20,000 |
| Phone | 1,000 rupees | 12,000 rupees |
| newspaper books | 1,000 rupees | 12,000 rupees |
| Bonus (Annual) | Rs 5,400 | 64,800 rupees |
| Gratuity | Rs 3,600 | 43,200 rupees |
| total salary | Rs 1,50,000 | Rs 18,00,000 |
What will change in the new structure, how much money in which part?
- Out of your total CTC, Rs 1.19 lakh will be taxed. That means 6.6 percent tax of CTC.
- Take home salary – Rs 1.06 lakh, 70.4 percent of CTC.
- Retirement savings- Rs 3.06 lakh, 17 per cent of the total CTC.
- In the new structure, your annual retirement savings will be Rs 3.06 (17% of CTC) as against Rs 1.96 lakh (10.9% of CTC) earlier. Meaning, your annual retirement savings will increase by Rs 1.10 lakh under the new structure.
Tax burden will increase in HRA
According to the new rule, suppose the annual basic salary is Rs 9 lakh, then the HRA will be Rs 4,50,000. But, you will get tax exemption only on the exemption of Rs 2,42,400. Meaning tax will have to be paid on Rs 2,07,600. Earlier, you had to pay tax on only Rs 45,600 received under the head of HRA. There is going to be a huge increase in tax on HRA in the new salary structure. If you compare the tax on annual CTC, now you have to pay tax of 1.10 lakh (6.1% of total CTC), which will be Rs 1.19 lakh (6.6% of total CTC) in the new structure.
This is how your in hand salary will increase
Your take home salary will decrease in the new structure. But, if you want to find some option for this, then you have a way. You can leave the NPS, because whether to put or not to put money in it depends on your wish. This is not the case with EPF, in EPF you have to pay 12% of your basic salary. If you have left NPS, then your salary structure can be like this-
| income | Monthly | annual |
| basic salary | 75,000 rupees | 9,00,000 rupees |
| HRA | 37,500 rupees | Rs 4,50,000 |
| special allowance | Rs 2,400 | 28,800 rupees |
| PF Contribution | 9,000 rupees | Rs 1,08,000 |
| NPS Contribution | , | , |
| fuel and transport | Rs 16,000 | Rs 1,92,000 |
| Phone | 2,000 rupees | Rs 24,000 |
| newspaper books | 1,500 rupees | Rs 18,000 |
| Bonus (Annual) | 3,000 rupees | Rs 36,000 |
| Gratuity | Rs 3,600 | 43,200 rupees |
| total salary | Rs 1,50,000 | Rs 18,00,000 |
How much tax and in hand salary will be made here?
- Out of your total CTC, Rs 1.19 lakh will be taxed. That means 6.6 percent tax of CTC.
- Take home salary – Rs 1.15 lakh, 77 percent of CTC.
- Retirement Savings – Rs 2.16 lakh, 12 per cent of the total CTC.
- On leaving NPS in the new structure, your total take home salary will be Rs 1.15 (77% of CTC), which was earlier Rs 1.06 lakh (70.4% of CTC. Whereas, the tax has not been the same. But, retirement savings will be Rs 2.16 lakh (Rs. 12%), which was earlier Rs 3.06 lakh (17% of CTC).
What is the full bottom line of the salary structure?
Shown above are 3 structures…
If you want, you can retain your take home salary as it is now, but the tax will increase. However, annual retirement savings will increase.
In the existing salary structure, the take home salary is Rs 1.14 lakh, but in the new structure the take home salary will be reduced to Rs 1.08 lakh. If you leave the option of NPS, then it will increase to Rs 1.15 lakh. In the first structure, tax is to be paid Rs 1.10 lakh (6.14% of CTC). In the new structure, this will increase to Rs 1.19 lakh (6.6% of CTC). Even if you leave NPS, there will be no tax effect and you will have to pay only Rs 1.19 lakh. Retirement saving is Rs 1.96 lakh (10.9% of CTC), which will increase to Rs 3.06 lakh (17% of CTC) in the new structure. On leaving NPS, retirement savings will be Rs 2.16 lakh (12% of CTC) instead of Rs 1.96 lakh. In this case your take home salary will increase.
