But now this allowance is not only an immediate relief, but is also going to form the foundation of the possible 8th Pay Commission to be implemented in 2026. The recently released AICPI-IW (All India Consumer Price Index for Industrial Workers) data of July 2025 is giving important indications in this direction.

What is the whole matter?

The government decides the rate of DA every half year on the basis of AICPI-IW data. In the July 2025 data, the index has increased by 1.5 points to 146.5, which can become the basis not only for the next DA hike but also for the formula of the 8th Pay Commission.

According to financial expert HS Tiwari, this figure not only indicates an increase in DA, but it can also determine the fitment factor and minimum wages, as was done during the 7th Pay Commission in 2016.

What is the fitment factor? 

The fitment factor is the multiplier by which your current basic salary is multiplied to determine the new salary.

In the 7th Pay Commission, it was kept at 2.57.
This meant: an increase of about 14.2% in the total salary by adding the old basic pay + DA. Now if the DA rates are higher in the 8th Pay Commission based on the AICPI-IW index, then the fitment factor can also be bigger, due to which a strong increase in your basic salary is possible.

How is AICPI-IW linked to the new pay commission?

• Index of July 2025: 146.5
• This rate will affect the DA to be implemented from January 2026.
• On that basis, the new fitment factor and minimum wage will be decided in the Pay Commission report.
• Important point: As soon as the new Pay Commission is implemented, the DA rate gets reset (0%), but the existing data definitely forms the basis of the new pay formula.

How far has the government’s preparations reached?

At present, the government has not officially announced the ‘Terms of Reference’ of the 8th Pay Commission or the appointment of its chairman. Due to this delay, it may take some time for the report and recommendations to come, but preparations are going on secretly at the level of the Finance Ministry and the Labor Bureau.

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However, there has been no salary hike for senior employees. It is also worth noting that this is the lowest increase the company has made in the last four years. This decision comes after the biggest layoff ever done by the company in July. The company is moving ahead on AI-based automation and cost cutting strategy.

Will be considered effective from September 1

According to sources, since late Monday evening, the company has started sending letters related to salary hike to the employees. This increase will be considered effective from September 1. The official reply to the email sent by the company is still awaited. Tata Consultancy Services (TCS) has announced the lowest salary hike in the last four years for the financial year 2025-26. This decision comes after the biggest layoff ever done by the company in July, indicating that TCS is now moving rapidly towards AI-based automation and cost cutting strategy.

The company has been in discussion regarding the decisions

For the last two months, the company has been in the news for its HR-related decisions. For the last few months, TCS has been in the news for its Human Resource (HR)-related decisions. First, the salary hike was postponed due to market uncertainty. Then, suddenly, the company announced the layoff of 2% of its employees (about 12,000 people). And now, it has been decided to give a salary hike to 80% of its employees.

Top performers got more than 10% hike

Sources also say that most of the lower to middle level employees have been eligible for salary hikes. At the same time, top performers have been given salary hikes of more than 10%. TCS has recorded an attrition rate of 13.8% in the June 2025 quarter, which is slightly higher than the previous quarter. The company has considered this to be slightly above its “comfort zone” (11–13%).

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According to reports, the government may soon increase DA and Dearness Relief (DR). This decision will have a direct impact on the salary and pension of central employees. Let us tell you that this decision was being awaited for a long time and now the news is that a decision will be taken on it soon.

PM Modi can take a big decision in the cabinet meeting

There was speculation for a long time about the increase in DA by the government. Earlier it was expected that it would be announced before Holi, but it did not happen. Now the big update is that a final decision can be taken on this in the cabinet meeting to be held on 19 March 2025 under the chairmanship of Prime Minister Narendra Modi. If a decision is taken to increase DA in this, then crores of employees and pensioners will get direct benefit from it.

DA likely to increase from 53% to 55%

According to reports, the government may announce a 2% increase in dearness allowance, which will increase the current DA from 53% to 55%. Dearness allowance is an important part of the salary of government employees, which is revised twice every year (January and July) to give them relief from rising inflation.  

Salary of employees will increase  

For example, if an employee’s Basic Pay is ₹1,00,000, then under the current 53% DA, he is getting ₹53,000. If DA increases by 2% to 55%, then now he will get ₹55,000, that is, there will be a direct increase of ₹2,000.  

Employees and pensioners will get direct benefit  

Dearness Allowance is given to government employees, while pensioners get it in the form of Dearness Relief (DR). This increase will benefit lakhs of central government employees and pensioners. 

How much benefit do Multi Tasking Staff (MTS) and entry-level employees get?  

An entry-level employee, whose basic pay is ₹ 18,000, will also get direct benefit of this increase.  

• Currently at 53% DA: ₹9,540  
• If 55% DA: ₹9,900  
• Direct benefit: Increase of ₹360  

If the DA increase would have been 3%, it would have reached ₹ 10,080, an increase of ₹ 540.  

The increase will be implemented from January 2025, will the arrears also be paid?

Any DA hike by the government will be effective from January 1, 2025. This means that employees will also get arrears from January to March 2025. Last time the government had increased DA by 3% in July 2024, due to which it increased from 50% to 53%. Now after the possible increase this time, DA can reach 55%.  

Now all eyes are on the Modi cabinet meeting to be held on March 19. If the government announces DA hike on this day, then all the employees and pensioners of the central government will get its benefit. This will increase the in-hand salary of the employees. Now it remains to be seen whether the government increases it by 2% this time or gives more relief than expected.

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That meeting was chaired by Chief Minister Prem Singh Tamang. Officials said that with the four per cent increase, the dearness allowance for government employees and pensioners has increased to 46 per cent. He said that the increase in DA will have an impact of Rs 174.6 crore on the state treasury in the current financial year.

The central government increased DA at the beginning of the year

The dearness allowance of central government employees was increased from 46 per cent to 50 per cent at the beginning of the year. The government had approved a 4 per cent increase in dearness allowance from January 1, 2024. Now these 6 allowances of government employees have also increased. The Department of Personnel and Training (DoPT) has issued instructions to release the allowances being given to central government employees as per the Office Memorandum dated April 2, 2024.

Also Read: When the toll employee asked for toll, a bulldozer was run on the plaza, video goes viral

This DA of central employees has increased

• Dearness Allowance
• House Rent Allowance
• Transport Allowance
• Children Education Allowance
• Traveling allowance during tour
• Deputation Allowance
• Fixed Medical Allowance for Pensioners
• Higher Qualification Allowance
• Leave Travel Encashment
• Leave Encashment
• non practicing allowance

Central government employees are getting 50% DA

Dearness Allowance (DA) for central government employees has recently increased from 4% to 50%. Dearness Relief (DR) for central government pensioners has also been increased from 4% to 50%. These revised rates will be applicable from January 1, 2024.

House Rent Allowance (HRA)

As DA reached 50%, the government has revised the HRA rates to 30%, 20% and 10% of the basic salary in cities X, Y and Z respectively. The house rent allowance given to employees depends on the category of the city in which they live. HRA for X, Y and Z type of cities was 27%, 18% and 9% respectively, which has been increased to 30%, 20% and 10%.

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Sources said on Thursday that the decision of salary hike will be effective from April 1, 2024, while bonus is also being given to the employees on the basis of performance in the financial year 2023-24. The company has increased the salary by up to Rs 15000. Along with this, an annual bonus of up to Rs 1.8 lakh will be given which will be based on the performance of the employee.

According to sources, Air India’s Chief Human Resources Officer Ravindra Kumar GP announced salary hike and performance bonus to the employees. The airline has around 18,000 employees. However, it was not immediately known what was the extent of this salary hike.

Also Read: Income Tax Recruitment 2024: Eligibility , Age Limit, salary, application process

This is the first salary hike for Air India employees after the control of Air India passed from the government to the Tata Group in January 2022. Last year, only the work of contract restructuring and compensation of old employees was done.

Sources said that apart from the salary hike scheduled for FY 2023-24, the airline has also introduced a component of annual target performance bonus for its pilots based on company and individual performance which will be effective from FY 2024-25.

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DA Hike: This year has brought tremendous gifts for central employees. They will be paid 50 percent dearness allowance from January. This has been decided from the AICPI index. But, there is still time for its announcement by the Central Government. Meanwhile, there is another good news. Not only has the dearness allowance of central employees increased, but now their salary is going to increase directly.

As soon as dearness allowance is approved, there will be a huge jump in their salary. In one stroke, the salary of the employees will increase by Rs 9000. Actually, this is going to happen because of a rule of the Central Government.

This rule was made in the year 2016. Now we wait for March. Because, DA Hike is expected to be approved by the Union Cabinet in March itself. But, does this indicate the formation of the 8th Pay Commission?

What is the rule to increase the salary of employees?

Dearness allowance of central employees is increased every six months. At present, central employees are getting dearness allowance at the rate of 46 percent. From January 2024, dearness allowance will increase to 50 percent.

After this, as per the rules, this will be made void. Why? Now the rules made by the Central Government apply here. In the year 2016, the government had made a rule that as soon as dearness allowance reaches 50 percent, it will be reduced to zero.

How will the basic salary increase?

How will there be a huge increase in basic salary? For this let’s go into a little flashback. When the government implemented the 7th Pay Commission in 2016, dearness allowance was reduced to zero.

A new base year was fixed for calculations. Due to zero dearness allowance, the employees got the benefit that the previous dearness allowance was added to their basic salary. Now something similar is going to happen once again. There is a plan to increase the salary by once again merging the dearness allowance into the basic salary. Meaning, has the time come to constitute the 8th Pay Commission?

Dearness allowance will become zero (0)

Now the question comes that why would this happen? Actually, in the memorandum of the year 2016, it has been said that as soon as the Dearness Allowance (DA) reaches 50 percent i.e. 50% of the basic salary, it will be reduced to zero. Meaning, after becoming zero, the current dearness allowance will start back from 1 percent, 2 percent.

This will happen because, as soon as 50 percent dearness allowance (DA hike) is reached, it will be merged into the basic salary. With this, employees will not have to wait long for their salary revision. Earlier dearness allowance used to exceed more than 100 percent. This was the formula for the sixth salary.

Salary of central employees will increase by Rs 9000

At present, the basic salary at pay-bed level-1 is Rs 18000. This is the most minimal basic. If we look at its calculation, a total of Rs 7560 is currently available as dearness allowance. But, if we look at the same calculation at 50 percent dearness allowance, then we will get Rs 9000. Now here comes the catch.

As soon as 50 percent DA is reached, it will be reduced to zero and added to the basic salary. Meaning, the salary of Rs 18000 will increase by Rs 9000 to Rs 27000. After this dearness allowance will be calculated at Rs 27000. If DA increases by 3% after becoming 0, then their salary will increase by Rs 810 per month.

When will central employees get gifts?

At present, the dearness allowance of Central Government employees is 42 percent. Now the next revision is to be held in July 2023, in which there may be an increase of 4 percent. This means that after July, dearness allowance will increase at the rate of 46 percent. In such a situation,

the revision of dearness allowance for January 2024 will have to be kept an eye on. If it increases by 4 percent then dearness allowance will reach 50 percent. If it increases by 3 percent then it will be 49 percent.

In case of 50%, dearness allowance will become zero from January 2024 itself. This means that from July 2024, dearness allowance will be calculated only on the increased basic salary. If it remains at 49 percent then we will have to wait till July 2024.

Why is dearness allowance made zero?

Whenever a new pay scale (Central pay commission) is implemented, the DA received by the employees is added to the basic salary. Experts say that as a rule, 100 percent DA received by employees should be added to the basic salary, but this is not possible. Financial situation comes in the way.

However, this was done in the year 2016. Before that, in the year 2006, when the sixth pay scale came, at that time 187 percent DA was being given in the fifth pay scale till December. The entire DA was merged into the basic pay. Therefore the coefficient of the sixth pay scale was 1.87. Then new pay band and new grade pay were also created. But, it took 3 years to deliver it.

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Can After the 4 per cent hike, DA will increase to 46 per cent. DA increases twice a year in January and July. The last increase in DA was done in March 2023, which was considered applicable from 1 January 2023. Then DA was increased by 4 percent to 42 percent.

Central government can increase DA by 4 percent

According to media reports, the central government may take a decision to increase DA by 4 percent, after which DA will increase to 46 percent. Reports say that the next DA hike is likely to be announced in September or October. Dearness Allowance (DA) is given to government employees, while Dearness Allowance (DR) is given to pensioners. According to official data, there are 47.58 lakh central government employees and 69.76 lakh pensioners. These employees and pensioners will be benefitted after the upcoming DA hike.

Recently Madhya Pradesh government had increased DA

Recently Madhya Pradesh has increased DA by 4% for its employees. Earlier, the Odisha government had also announced a four per cent hike in dearness allowance for its employees and pensioners. DA for employees and pensioners has been increased to 42 per cent from the existing 38 per cent. The increased DA will be applicable from January 23 this year and the employees will get this money along with June, it was decided.

These states have also increased DA

Earlier, Karnataka had also increased DA by 4 percent from January 1, 2023. DA in Karnataka has been increased from 31% to 35%. Jharkhand and Himachal Pradesh have also announced salary hike for their government employees and pensioners.

Is DA calculated in this way?

The Central Government has revised DA and DR for the employees on the basis of a formula. Dearness Allowance Percentage = ((Average of All India Consumer Price Index (Base Year 2001=100) for last 12 months -115.76)/115.76)x100

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Let us tell you that according to the ‘Future of Pay’ report 2023 for the financial year 2022-23, the average salary in India will increase by 10.2 percent in 2023. This is less than the actual increment of 10.4 per cent in the last financial year 2022.

There will be the highest salary hike in these sectors –

The top three sectors with the highest estimated salary hike this year are related to technology. In the year 2023, the highest salary increase of 12.5 percent is estimated in the e-commerce sector. On the other hand, an average salary hike of 11.9 per cent is expected in the professional services sector. At number three is the IT sector facing retrenchment at the global level, in which a salary hike of 10.8 percent has been estimated.

Job path will open here –

According to a report, in the year 2023, India is expected to get more jobs in the financial technology sector along with renewable energy, e-commerce, digital services, healthcare, telecommunications, educational services, retail and logistics. In these sectors, it is expected to open new avenues for jobs this year. This is a news of hope for the employees affected by layoffs in different sectors.

There will be more demand for these skills-

At present, due to more emphasis on digitalization and technical things, there is going to be a huge demand for high skilled labor work in the technology sector. According to the report, the demand for workers with technical skills like AI, ML and cloud computing will be high this year.

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New preparations are being made by the government for this. Although it has not been officially announced yet, but it is believed that the basic salary will be increased soon. With this, the basic salary can increase from 18000 to 26000 rupees.

Decision on increasing the fitment-

According to media reports, in view of the upcoming elections, the Modi government may take a decision on increasing the fitment. Along with this, new formulas can also be prepared to increase the salary. At present the fitment factor for central employees is 2.57 per cent dearness allowance, 42 per cent employees are demanding that their fitment factor be increased to 3.68.

The fitment factor will increase to 3.68 percent.

The same possibility is being expressed that in view of the upcoming elections, the fitment factor can be increased from 2.57 years to 3 percent or 3.68 percent under the Seventh Pay Commission. It is believed that in 2024, the fitment factor can be increased based on the recommendation of the Seventh Pay Commission. Although elections are to be held in 2024. Hence the fitment factor can be implemented from 2026 onwards.

If sources are to be believed, the fitment factor will not increase in the year 2023, but it can be increased by reviewing it in 2024. However, no clarification has been given by the government on this yet. This will be discussed by the department. Also the recommendation can be sent to the Finance Ministry. At the same time, the discussion of setting up a new pay commission next year is getting intensified.

Will tell that the fitment factor is considered very important for central employees. On the basis of this, the minimum salary of the employees is fixed. According to the recommendation of the Seventh Pay Commission, the basic salary of central employees increases. Let us inform that earlier the fitment factor was increased by more than two and a half times.

Basic salary will increase from ₹18000 to 21000-

For employees, if the existing fitment factor of 2.57 is increased to three, then the basic salary will increase from ₹ 18000 to ₹ 21000. If it is increased to 3.68 as per the demand of the employees, then the salary will increase to ₹ 25760. On the other hand, if this happens, 68 lakh employees will get its benefit.

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Explain that under the Sixth Pay Commission, the basic salary entry level of the employees was 7 thousand, on which 125 percent dearness allowance was available. After the implementation of the Seventh Pay Commission, the salary of the employees has increased by up to 14 percent. Along with this, DA is also being given.

Role of pay matrix in salary of employees

The pay matrix table gives complete information about the basic salary of the central employees to the increase. This is a simple salary structure. Under this, pay levels have been created, due to which it is easy to calculate the salary. Five salary levels have been created under the pay matrix table.

• Rs 18000 Rs 56 thousand 900 under first pay level
• 19,900 to 63,200 under the second pay level
• Rs 21,700 to Rs 69,100 in the third pay level
• Rs 25,500 to Rs 81,100 in the fourth pay level
• Rs 29,900 to Rs 92,200 in the fifth pay level

what is pay matrix table 

The pay matrix chart shows the salary of government employees. Their salary has been divided according to the pay level. You can calculate your level and increment using the pay matrix. Under the Seventh Pay Commission, all the employees can calculate their salary with the help of this pay matrix. Under the Seventh Pay Commission, the minimum limit of pay level is Rs 18 thousand, which means that no employee will get salary less than this.

How is the salary calculated under the 7th Pay Commission? 

The Seventh Pay Commission was implemented on January 1, 2016, due to which the fitment factor or basic salary of the employees increased by 2.57 times. The salary of government employees is calculated on the basis of basic salary. Total monthly salary is given by adding total basic salary + DA + HRA + travel account + other allowances.

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According to reports, after the increase in the fitment factor, the minimum pay of government employees will increase from Rs 18,000 to Rs 26,000. Reports also say that the government may revise the fitment factor and dearness allowance (DA) in March after Holi.

Fitment factor

Presently the fitment factor of the employees is 2.57 per cent. This means that if someone gets a basic pay of Rs 15,500 in 4200 grade pay, then his total pay will be Rs 15,500×2.57 i.e. Rs 39,835. The 6th CPC had recommended a fitment ratio of 1.86. According to reports, the employees are now demanding the government to increase the fitment factor to 3.68. This hike will increase the minimum wage from Rs 18,000 to Rs 26,000.

There will be an increase in DA

Dearness Allowance (DA) and Dearness Relief (DR) are revised twice a year. These new rates are considered applicable from January 1 and July 1. The government last increased DA in September 2022. This benefited 48 lakh central government employees and 68 lakh pensioners of the country. Then the government increased the DA by 4 percent. The government increased DA from 34 percent to 38 percent. Earlier, the government had increased DA by three per cent to 34 per cent in March under the Seventh Pay Commission. According to media reports, apart from the fitment factor, the government may soon revise the DA as well.

18-month DA arrears

The government may also soon resolve the issue of DA arrears of 18 months. DA and DR were not increased for Central Government employees/pensioners on January 1, 2020, July 1, 2020 and January 1, 2021. Now the workers are pressurizing the government to give it.

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The demand for the 8th Pay Commission is now rising. If the 8th Pay Commission is implemented, then there will be a big jump in the salary of central employees. Actually, with the implementation of the 8th Pay Commission, there will be an increase in the basic of the employees, due to which almost all the allowances will increase.

Salary of employees will increase

It is noteworthy that at present, under the 7th Pay Commission, the minimum basic salary of the employees is Rs 18,000, while the maximum basic salary is Rs 56,900. Let us tell you that the revised basic pay is calculated from the old basic pay only on the basis of fitment factor. Fitment factor is also an important recommendation in the Pay Commission report.

Basic will increase with fitment factor

According to our associate website Zee Business, the fitment factor has been kept at 2.57 times in the recommendations of the 7th Pay Commission. On this basis, the salary of central employees was revised. Looking at the figures, the lowest salary hike was received in the 7th Pay Commission.

However, the basic salary was increased to Rs 18,000. Now it is being told that in the 8th Pay Commission, the fitment factor can be increased to 3.68 times. That is, the minimum salary of the employees will increase from Rs 18,000 to Rs 26,000. Let us see what was the salary hike in which pay commission.

4th Pay Commission Fitment Factor

Salary Increase: 27.6%

Minimum Pay Scale: Rs 750

5th Pay Commission Fitment Factor

Salary Hike: 31%

Minimum Pay Scale: Rs 2,550

6th Pay Commission Fitment Factor

Fitment Factor: 1.86 times

Salary Increase: 54%

Minimum Pay Scale: Rs 7,000

7th Pay Commission Fitment Factor

Fitment Factor: 2.57 times

Salary Hike: 14.29%

Minimum Pay Scale: Rs 18,000

8th Pay Commission, how much will the salary increase? (Fitness Factor)

Fitment factor: 3.68 times possible

Increment: 44.44%

Minimum Pay Scale: Rs.26000 Possible

Will 8th pay commission come or not?

At present, the government does not have any proposal regarding the 8th Pay Commission. Minister of State for Finance Pankaj Chowdhary himself has also given an answer on this in the Lok Sabha. But, if sources are to be believed, the next pay commission may be considered in the year 2024.

There is still time for the 8th Pay Commission to come. If it is to be implemented in the year 2026, then the government has time to consider the new scale of increment. But, whatever the scale will be, it will be implemented under the Pay Commission only. For this, the Pay Commission can also be formed in the year 2024.

At the same time, experts believe that in 2024 general elections are also to be held in the country. In such a situation, the government would not want to anger the central employees. That’s why it is premature to say that the next pay commission will not come.

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This increase in the salary of central employees can be up to a maximum of Rs 90,000. The government hikes DA twice a year under the 7th Pay Commission. Now is the first installment to increase DA.

dearness allowance will increase before holi

Under the 7th Pay Commission, the government has to increase DA twice a year. If we look at the record of previous years, then the government has been increasing DA in March and July. The central government may soon increase the Dearness Allowance (DA) received by central employees in March. The government can increase the dearness allowance by 3 percent. The increase in DA in March will be considered applicable from January 1, 2023.

Government employees will be benefited

The government’s increase in dearness allowance will benefit around 1 crore central government employees and pensioners. Currently, government employees get DA at the rate of 38 percent. If the government increases DA by 3 percent, then the DA of the employees will increase to 41 percent. That is, government employees will get 41 percent of the basic salary as DA. These new rates will be considered applicable from January 1, 2023.

Salary will increase up to Rs 90,000

Taking out the calculation of the increase in dearness allowance, the salary of central officers working at the level of cabinet secretary, whose salary is Rs 2.50 lakh, will increase by Rs 7,500. This increase is monthly and if we look at the increase for the whole year, it will be Rs 90,000 annually. At the same time, there will be an increase of Rs 900 in the salary of employees earning Rs 30,000 a month. His salary will increase by Rs 10,800 per annum.

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It was announced by the CM before Diwali. However, due to some reason this process could not be taken forward. Now with the formation of the Commission, the formation of the Seventh Pay Commission has been approved. Six months time has been given to submit its recommendation.

Commission’s constitution-member appointed

The formation of the Seventh Pay Commission, headed by retired Chief Secretary K Sudhakar Rao, has been approved by Chief Minister Basavaraj Bommai. Many of these officers were appointed as member secretaries.

State government retired IAS officer PP Ramamurthy, retired principal director audit and accounts department Srikanth V Vanavalli as member while joint secretary infrastructure department, Rani Koralpati has been appointed as member secretary of the panel.

Recommend as per 2022 guidelines

Earlier in the statement issued by the Chief Minister’s Office, it was said that keeping in view the fiscal responsibility and other financial obligation as per the 2022 guidelines, the recommendation will be made by the commission.

In the commission’s recommendation, everything like pay scales of government employees, aided educational institutions and non-educational universities, retired facilities will be examined and a report will be submitted to the state government.

At present, the benefit of the pay scale as per the 6th Pay Commission is being provided to the employees of Karnataka State. The Seventh Pay Commission will be constituted by the CM to revise the pay scales of state government employees.

There will be an increase in salary from 10 to 50 thousand rupees

With this announcement, lakhs of employee pensioners of the state government will be greatly benefited. There will be a bumper increase in their salary and with the implementation of the Seventh Pay Commission, an increase in their salary will be seen from Rs 10,000 to Rs 50,000.

DA hiked by 3.75%

Earlier on October 7, the dearness allowance of the employees was increased by 3.75% by the Karnataka Chief Minister. The hike was implemented from July 1. The government’s financial fund was expected to cost Rs 1282.72 crore on the increase in staff officers.

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After the implementation of the new labor law, your in hand salary will not decrease but will increase. Now you must have been hearing that after the implementation of the new labor law, your in-hand salary will be reduced in the salary structure. Because the basic salary will be 50%. This will cut more money into the retirement fund. The huge amount of allowances will be reduced.

Basic salary will be 50 percent-

Let us tell you that the government has prepared 4 New Labor Codes by adding 29 labor laws. According to the provisions of the new law, the basic salary will be 50% of the total salary (CTC) in the salary that companies will pay to their employees. This means that the basic salary which used to be 30-35 percent earlier, will be increased by 15 percent directly and the remaining 50 percent will be part of reimbursement-allowance.

What is in the current salary structure?

Suppose your monthly salary is an annual package of Rs 1.5 lakh i.e. Rs 18 lakh. 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.

How much tax is made, how much is the salary in hand and how much is retirement savings?

Out of your total CTC, Rs 1.10 lakh will be taxed. That means 6.14 percent tax of CTC. Take home salary – Rs 1.14 lakh, 76.1 percent of CTC. Retirement savings – Rs 1.96 lakh, totaling 10.9 percent of CTC.

Less tax exemption will be available in HRA-

According to the new rule, suppose the annual basic salary is Rs 9 lakh, then HRA will be Rs 4,50,000. But, you will get tax exemption only on 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.

Let us tell you that your take home salary will decrease in the new structure, but if you want some option to be taken out, 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.

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