Top 6 Financial Changes that will impact you from April 1st

With the new Financial Year 2021-22 set to start from April 1, 2021, there are major financial changes that will directly impact the lives of individuals, especially their money matters. These changes vary from a change in the new wage rule to changes in income tax rule for EPF and TDS and seven public sector bank mergers, all of which will come into effect from April 1st.

Here are the Top 6 Financial Changes: 

1. New Wage Rule

•If the Centre implements the New Wage Code Bill in Financial Year 2021-22, then it will directly impact the take-home salaries of employees from April 1st, as the companies will be required to restructure salary packages. 

•As per the new compensation rules, the allowance component cannot exceed 50 percent of the total salary or compensation. This means that the basic salary has to be 50 percent. To comply with this rule, the employers will be required to increase the basic pay component of salaries, which will result in a proportional rise in gratuity payments and employees’ contribution to the provident fund.

•The increase in such contributions may result in lower take-home salaries for employees. However, the will help in providing better social security and retirement benefits.

•Currently, most private companies prefer keeping the non-allowance part of the total compensation less than 50 percent and the allowance part higher. 

2. New EPF tax rules

Union Finance Minister Nirmala Sitharaman had announced during the 2021 Budget presentation that interest on employee contributions to the provident fund of over Rs 2.5 lakh per annum would be taxed, starting from April 1st. There would be tax exemption for PF up to Rs 2.5 lakh. 

•The interest received from employee’s provident fund (EPF) is exempt from tax under the existing tax provisions. However, from April 1st the interest earned on the EPF contributions (only employee contribution) above Rs 2.5 lakh a year will now be taxable.

Who will this impact?

Almost 12 percent of an employee's basic salary and performance wages is compulsorily deducted as provident fund, while the employer contributes another 12%.

The move will mainly impact the high-income earners and High Net-worth Individuals (HNIs). So, anyone who earns more than Rs 20.83 lakh a year will be taxed on their interest on EPF contribution. 

3. Income Tax rule on TDS to change

Union Finance Minister Nirmala Sitharaman had announced during her budget speech that the income tax rule for TDS (Tax Deducted at Source) will get changed from the new fiscal, which means from 1st April, 2021. Under the new rule, if a person doesn't file an income tax return (ITR) from April 1, 2021, then the TDS rate on bank deposits would double. 

4. LPG cylinder price

The LPG cylinder price in New Delhi was increased to Rs 819 per cylinder from Rs 769 per cylinder in March 2021. The LPG cylinder price is expected to rise further in April due to a surge in crude oil prices. 

5. Public sector bank mergers

The account holders of seven public sector banks will need to get their passbook and cheque book updated as they will become non-functional from April 1, 2021.

The banks include  Vijaya Bank,  Dena Bank, Corporation Bank, Allahabad Bank, Andhra Bank, Oriental Bank of Commerce and United Bank of India.  This is because these seven public sector banks are scheduled to merge with various other banks effective from April 1st. 

While Dena Bank and Vijaya Bank have been merged with Bank of Baroda, Oriental Bank of Commerce and United Bank of India have been merged with Punjab National Bank (PNB), Corporation Bank and Andhra Bank have been merged with Union Bank of India and the Allahabad Bank has been merged with the Indian Bank.

6. Banks to cancel auto-debit facility

Banks will be cancelling all auto-debit payments for DTH, mobile phone, broadband, electricity, water and other utilities bill starting from April 1st due to RBI's new guidelines.

The banks have started informing customers about cancellation of e-mandates for auto-debit of funds from credit, debit cards, stating that they will have to initiate the transaction manually from April 1.