CHENNAI: From higher basic pay and increased PF savings to a simpler tax system and quicker final settlements, key reforms come into force. Here’s a quick guide to what changes for employees and taxpayers.
What changes in your salary structure?
Basic pay must now be at least 50% of your CTC, forcing companies to rebalance salary components. This ends the practice of keeping basic salaries low to maximise take-home pay.
Will your take-home pay reduce?
Yes, slightly at first, as higher PF and gratuity contributions increase deductions. However, this shift strengthens long-term financial security.
What’s the long-term benefit?
Higher PF contributions will significantly boost your retirement savings over time. Gratuity payouts will also rise since they are linked to basic pay.
How are employers affected?
Companies will face higher compliance costs due to increased PF and gratuity contributions. Sectors with lower basic pay structures will feel the biggest impact.
How fast will you get your final settlement now?
Employees must receive full and final settlements within two working days of leaving. Delays can now be treated as a legal violation.
Do PF and gratuity follow the same rule?
No, they continue under separate timelines despite faster salary settlements. Gratuity and PF processes remain unchanged.
What’s new in the income tax system?
A new Income Tax Act replaces the older law with fewer sections and clearer wording. The aim is to make tax compliance simpler.
Are tax rates or deductions changing?
No, tax rates and most deductions remain the same under the new system. The reform focuses on simplification, not restructuring liabilities.
What replaces assessment year confusion?
The system introduces a single 'tax year,' removing the need to track multiple terms. This makes filing returns more straightforward.
Any relief for foreign travel or remittances?
Yes, TCS is reduced to 2%, easing upfront costs for overseas spending. This benefits travellers, students, and families sending money abroad.
What about Sovereign Gold Bond investors?
Tax-free maturity now applies only to those who invested during primary issuance. Secondary market investors will now face capital gains tax.
Can you revise your tax return later?
Yes, the revision window is extended to 12 months from the end of the tax year. However, a fee will apply if revisions are made after 9 months.