Two points here - conveyance - 1600 and medical. Exemptions for these two components were replaced with a standard deduction. Most of the companies have removed these two components as part of the salary structure as there is no tax benefit. If these two components still are part of your compensation structure, ensure they are taxed.
From India, Bangalore
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4From India, Bangalore
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Dear HBJ,
The monthly gross salary payable, which comprises of basic, HRA, and Special Allowance, is Rs. 37,425.00. The only inclusive component is basic, which falls short of 50% of the gross. Therefore, that amount should be taken out from the Special Allowance and added to the basic as wages for all purposes of calculation under the Code.
From India, Salem
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The monthly gross salary payable, which comprises of basic, HRA, and Special Allowance, is Rs. 37,425.00. The only inclusive component is basic, which falls short of 50% of the gross. Therefore, that amount should be taken out from the Special Allowance and added to the basic as wages for all purposes of calculation under the Code.
From India, Salem
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Thank you for the replies.
Mr. Venkatraman, yes, these allowances are given as wages and are taxed. We have just retained the old nomenclature.
Mr. Umakanthan, thanks for your inputs. We shall modify the salary structure accordingly.
From India, Aurangabad
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Mr. Venkatraman, yes, these allowances are given as wages and are taxed. We have just retained the old nomenclature.
Mr. Umakanthan, thanks for your inputs. We shall modify the salary structure accordingly.
From India, Aurangabad
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Dear HBJ,
Based on the data you have provided, it appears that the total cash payable to the employee is $512,450.00 per year, and the Employer's PF contribution is $20,808.00 per year. Therefore, the total cash is $533,258.00. 50% of this amount, which is $266,629.00, should be the wage (Basic + DA) per year. This translates to $22,219.00 per month, which can be rounded off to $22,300.00 per month. The rest of the amount will consist of monthly and yearly components other than Basic & DA as per the wage code.
Thanks & regards,
S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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Based on the data you have provided, it appears that the total cash payable to the employee is $512,450.00 per year, and the Employer's PF contribution is $20,808.00 per year. Therefore, the total cash is $533,258.00. 50% of this amount, which is $266,629.00, should be the wage (Basic + DA) per year. This translates to $22,219.00 per month, which can be rounded off to $22,300.00 per month. The rest of the amount will consist of monthly and yearly components other than Basic & DA as per the wage code.
Thanks & regards,
S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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Dear Mr. Bandyopadhyay,
According to Mr. Umakanthan, the basic needs to be 50% of the monthly salary of 37,425, which would amount to about Rs. 18,800 per month. However, you have also included annual allowances, bonus, and PF, making the monthly basic come to Rs. 22,300 per year. This shows a significant difference.
Can anyone please confirm which is the correct calculation as per the new Code of Wages? Should annual allowances, incentives, and PF also be considered as wages? If so, we would face a substantial burden of gratuity difference as well.
Thank you.
From India, Aurangabad
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According to Mr. Umakanthan, the basic needs to be 50% of the monthly salary of 37,425, which would amount to about Rs. 18,800 per month. However, you have also included annual allowances, bonus, and PF, making the monthly basic come to Rs. 22,300 per year. This shows a significant difference.
Can anyone please confirm which is the correct calculation as per the new Code of Wages? Should annual allowances, incentives, and PF also be considered as wages? If so, we would face a substantial burden of gratuity difference as well.
Thank you.
From India, Aurangabad
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Dear HBJ,
The confusion is about the quantum of wage (Basic & DA) - whether it is 50% of monthly gross or 50% of total remuneration payable to any employee, including the employer's PF contribution, bonus, etc.
For argument's sake, let us consider the wage as 50% of monthly gross. Now, in the exclusion list, there are employer's PF contribution, statutory bonus, etc.
In the proviso, it has been mentioned that "if the payments made by the employer to the employee under sub-clauses (a) to (i) exceed 50% of all the remuneration calculated under the clause, the amount which exceeds such 50% shall be deemed as remuneration and shall be accordingly added in wages under this clause." The employer's portion of PF, statutory bonus, etc. fall under sub-clauses (a) to (i).
Therefore, in your existing issue, if we add back the employer's portion of PF, bonus, etc. to the other side (other than Basic & DA), the Basic and DA will not be 50% of the monthly gross, thus not fulfilling the definition of wage as per the wage code.
Therefore, in my opinion, Basic & DA should be 50% of all the remuneration calculated under the clause.
You may cross-check with Tax Guru (ITAX), Mercer, Deloitte, etc., for the interpretation of wage as per the wage code.
Thanks & Regards,
S K Bandyopadhyay (WB, Howrah)
From India, New Delhi
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The confusion is about the quantum of wage (Basic & DA) - whether it is 50% of monthly gross or 50% of total remuneration payable to any employee, including the employer's PF contribution, bonus, etc.
For argument's sake, let us consider the wage as 50% of monthly gross. Now, in the exclusion list, there are employer's PF contribution, statutory bonus, etc.
In the proviso, it has been mentioned that "if the payments made by the employer to the employee under sub-clauses (a) to (i) exceed 50% of all the remuneration calculated under the clause, the amount which exceeds such 50% shall be deemed as remuneration and shall be accordingly added in wages under this clause." The employer's portion of PF, statutory bonus, etc. fall under sub-clauses (a) to (i).
Therefore, in your existing issue, if we add back the employer's portion of PF, bonus, etc. to the other side (other than Basic & DA), the Basic and DA will not be 50% of the monthly gross, thus not fulfilling the definition of wage as per the wage code.
Therefore, in my opinion, Basic & DA should be 50% of all the remuneration calculated under the clause.
You may cross-check with Tax Guru (ITAX), Mercer, Deloitte, etc., for the interpretation of wage as per the wage code.
Thanks & Regards,
S K Bandyopadhyay (WB, Howrah)
From India, New Delhi
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Dear HBJ,
So far as I am given to understand, "wages" or "salary" is the monetary compensation or that which can be computed in terms of money payable regularly in a certain periodicity as agreed in the contract of employment. Section 16 of the Code on Wages, 2019 also stipulates that no wage period shall exceed a month in any case. As such, it is distinctly different from "remuneration" or "income" for other statutory purposes like taxation, calculation of certain fringe benefits, etc.
Thus, the periodicity in which wages/salary could be payable to a paid employee or wage period is only a month at the maximum under any contract of employment. If we analyze the excluded components enumerated under sub-clauses (a) to (i) of section 2(y) of the Code in this backdrop, they are in the nature of additional financial payouts statutorily imposed on the employer proportionately based on the included components for the purpose of computation of bonus, contribution to EPF, and terminal benefits mentioned under sub-clauses (j) and (k). This premise of wages or salary to be computed per month only is also fortified by the definition of "wage worker" occurring under clause 2(90) of the Code on Social Security, 2020.
I suppose that under this context only you have mentioned the monthly gross salary in the example as Rs. 37,425.00 with the componential structure of Basic, Special Allowance, HRA, and Conveyance Allowance and raised the query. Of course, I do admit that in its attempt to simplify the definition of the term wages as uniformly applicable to all the four Labor Codes, the Code on Wages, 2019 has actually given room for interpretational tussle or hassle. I think that's how our learned friend Mr. Bandyopadhyay has interpreted the term in a way more or less analogous to C.T.C - well, perceptions can differ!
From India, Salem
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So far as I am given to understand, "wages" or "salary" is the monetary compensation or that which can be computed in terms of money payable regularly in a certain periodicity as agreed in the contract of employment. Section 16 of the Code on Wages, 2019 also stipulates that no wage period shall exceed a month in any case. As such, it is distinctly different from "remuneration" or "income" for other statutory purposes like taxation, calculation of certain fringe benefits, etc.
Thus, the periodicity in which wages/salary could be payable to a paid employee or wage period is only a month at the maximum under any contract of employment. If we analyze the excluded components enumerated under sub-clauses (a) to (i) of section 2(y) of the Code in this backdrop, they are in the nature of additional financial payouts statutorily imposed on the employer proportionately based on the included components for the purpose of computation of bonus, contribution to EPF, and terminal benefits mentioned under sub-clauses (j) and (k). This premise of wages or salary to be computed per month only is also fortified by the definition of "wage worker" occurring under clause 2(90) of the Code on Social Security, 2020.
I suppose that under this context only you have mentioned the monthly gross salary in the example as Rs. 37,425.00 with the componential structure of Basic, Special Allowance, HRA, and Conveyance Allowance and raised the query. Of course, I do admit that in its attempt to simplify the definition of the term wages as uniformly applicable to all the four Labor Codes, the Code on Wages, 2019 has actually given room for interpretational tussle or hassle. I think that's how our learned friend Mr. Bandyopadhyay has interpreted the term in a way more or less analogous to C.T.C - well, perceptions can differ!
From India, Salem
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Thank you, sirs, for your learned advice and interpretation. I think, at the moment, I will consider the definition of wages as a monthly payment and adjust the payment heads accordingly. With bonuses and yearly incentives considered, the gratuity contribution increases beyond a reasonable amount and does not seem justified in any way.
I appreciate the time taken by everyone to reply. Thank you once again.
From India, Aurangabad
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I appreciate the time taken by everyone to reply. Thank you once again.
From India, Aurangabad
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Monthly Gross 37,425/- and 50% of that is Basic & DA = 18,713/-. Therefore, other allowances are 18,713/-. Now in the exclusion list (a) & (c) - Statutory Bonus and Employer's portion of PF will be considered with other allowances. Let's say those amounts are 1000/- per month as statutory Bonus @8.33% (based on minimum wages of 12,000/-) and PF contribution, let's say on 15,000/- Basic & DA is 1800/- per month.
Therefore, the other allowances will be 18,713 + 1000 + 1800 = 21,513/- more than Basic and DA (18,713/-), not fulfilling the 50:50 condition of wage vs other allowances as per the definition of wage under codes. This is mathematics - no magic.
What will be the fate of my interpretation, only the future can say, but the above calculation cannot be changed until the Wage definition is changed.
S K Bandyopadhyay (WB, Howrah)
From India, New Delhi
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Therefore, the other allowances will be 18,713 + 1000 + 1800 = 21,513/- more than Basic and DA (18,713/-), not fulfilling the 50:50 condition of wage vs other allowances as per the definition of wage under codes. This is mathematics - no magic.
What will be the fate of my interpretation, only the future can say, but the above calculation cannot be changed until the Wage definition is changed.
S K Bandyopadhyay (WB, Howrah)
From India, New Delhi
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Hi Everyone,
Regarding the topic of the New-Wage Code 2019 implementation, I have a few questions:
a. With 50% being set up as the Basic for EPF compliance, is the ₹15,000/- limit still relevant?
b. What about the EPF contribution for those employees who had a higher basic, and both the employee and the employer were making EPF contributions based on the higher basic?
These points need clarification.
From India, Pune
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Regarding the topic of the New-Wage Code 2019 implementation, I have a few questions:
a. With 50% being set up as the Basic for EPF compliance, is the ₹15,000/- limit still relevant?
b. What about the EPF contribution for those employees who had a higher basic, and both the employee and the employer were making EPF contributions based on the higher basic?
These points need clarification.
From India, Pune
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