1. Contribution in Provident Fund will increase from April 2021

Until March 2021 contribution in Provident Fund was 12% of your basic salary. After April 2021, the basic salary will become 50 per cent of the Cost to Company (CTC).

The New wage code mandates the basic pay should be 50% or more in the total remuneration. Therefore, this helps to increase the Provident Fund Contribution.

2. Relaxation with respect to Leave Travel Concession (LTC) rules

The Government has declared relaxation in the Leave Travel concession (LTC) Scheme due to the COVID-19 outbreak in 2020.

The scheme offers tax exempt payment of leave travel concession/allowance to employees without the need for them to travel anywhere if the amount is spent as per specified conditions as per Press Release Dated 28th October 2020.

The announcement specifies an employee if not in a position to travel anywhere in India to avail the benefit of LTC/LTA in the current block of 2018-2021 due to novel coronavirus pandemic, can still avail benefit of exemption without any travel.

3. Changes in salary structure

After the implementation of the Finance Bill 2020, the share of basic salary in an employee’s Cost of Company (CTC) should be 50 percent or more. This means that companies will have to allocate 50 percent of CTC to the employees basic salary.

Your Salary structure can be impacted due to this if your basic salary was less than 50% of the CTC up to the month of March 2021.

Allowances to employees, such as leave travel, house rent, overtime and conveyance, will be capped to the remaining 50 per cent of CTC. At present, most private companies have a higher allowance component rather than the basic salary.

4. Gratuity is applicable for one year of continuous service, in case of those in “fixed term employment“.

As per the existing rules of Gratuity Act, 1972., employees are entitled to receive gratuity after 5 years of continuous work in the same company.

The Industrial Relations Code, 2020, defines the term of fixed term employment which are different from permanent worker or employee, in case of employee under fixed term contract, gratuity will be applicable for him/her if he renders continuous service for more than a year.


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