Many salaried individuals have experienced salary break-up rejigging for this financial year as companies comply with the Centre's new labour laws effective from 1 April 2026. According to reports from Mint, the primary change involves a new uniform definition of 'wages' that includes basic pay, dearness allowance (DA), and retention allowance, which must comprise at least 50% of an employee's annual compensation. However, as reported by Mint and Taxspanner, the new labour codes do not mandate a blanket shift to 50% basic pay - instead, they require compliance with a wage definition framework that can be achieved through intelligent structuring. Companies are adopting a balanced restructuring approach to comply with the law without sharply increasing costs, with experts noting that employers who proactively redesign compensation using a mix of statutory compliance and tax-efficient components will be better positioned to manage costs while protecting employee take-home pay.
The choice between old and new tax regimes depends on applicable tax slabs and deductions. As reported by Mint, the old tax regime offers tax slabs up to ₹2.5 lakh (nil), ₹2.5-5 lakh (5%), ₹5-10 lakh (20%), and above ₹10 lakh (30%). The new tax regime provides slabs up to ₹4 lakh (nil), ₹4-8 lakh (5%), ₹8-12 lakh (10%), ₹12-16 lakh (15%), ₹16-20 lakh (20%), ₹20-24 lakh (25%), and above ₹24 lakh (30%). The new regime offers lower tax rates but fewer deduction benefits, while the old regime provides higher tax slabs with significant deduction opportunities. According to India Employment News, the ₹75,000 standard deduction provides some relief, while the new regime allows deductions under Section 80C and higher PF contributions create more tax-saving opportunities.
While your overall Cost to Company (CTC) may remain unchanged, the structure of your salary is set to shift, bringing both short-term adjustments and long-term benefits. As reported by India Employment News, monthly in-hand (take-home) salary may fall even if total salary remains the same, due to higher PF contributions and increased deductions. However, companies can manage this impact through thoughtful salary structuring to control employer costs while preserving employee take-home pay. According to Taxspanner, companies may choose to restrict provident fund contributions to statutory minimum levels, and where both employer and employee mutually agree, contributions need not be linked to a higher wage base. The current wage ceiling of ₹15,000 per month effectively capping PF contributions at ₹1,800 per month for both employer and employee remains relevant, with the existing EPF Scheme, 1952 expected to continue applying during the transition period. From an employee perspective, tax-efficient components such as HRA, meal benefits, fuel reimbursements, car lease, and mobile/device leasing can help maintain or improve net take-home pay while optimising tax liability.
According to Puneet Gupta, Partner at EY India, the labour codes do not introduce or modify income-tax deductions or exemptions, which are governed by income-tax laws. As reported by Mint, Jay Parmar from Aurtus noted that while new labour laws alter salary structures and expand social security coverage, they do not create new income tax deductions but increase compulsory savings such as provident fund contributions that continue to enjoy existing tax benefits under income-tax provisions. According to Taxspanner, the new social security framework replaces the earlier PF law, but the existing EPF Scheme, 1952 is expected to continue applying during the transition period until a new scheme is notified. The new labour code is designed to improve long-term financial security, even if it slightly reduces immediate cash flow, with employees advised to look beyond just CTC to understand PF & Gratuity savings, fixed vs variable pay stability, and net take-home amounts to make better career and financial decisions.
