New Delhi: As the new financial year 2026-2027 (FY27) starts from next month, i.e. April 1, major changes are migratory for millions of private sector employees. The new Income Tax Act, 2025 and the New Labour Lawmaking spoken by the government are well-nigh to officially come into effect. These changes will directly impact the salary, PF contributions, and retirement funds.
What is the new labour code?
The government has simplified decades-old labour laws and consolidated them into four major codes: the Lawmaking on Wages, the Lawmaking on Social Security, the Industrial Relations Code, and the Occupational Safety, Health and Working Conditions Code.
The primary objective of these reforms is to streamline India's regulatory tracery into a simpler, unified system.
How will your salary structure change?
The biggest transpiration under the new rules will be in the salary structure. Now, an employee's vital salary will be mandatory to be at least 50 per cent of their total salary. Previously, companies have kept their vital salary low and solatium (HRA, special allowances) at 70-80 per cent to save tax. However, starting April 1, solatium will not exceed 50 per cent of the total salary.
When your vital salary increases, it will directly impact deductions that are a percentage of your vital salary. Provident Fund (PF) and gratuity calculations are based on your vital salary. For example, if the CTC is Rs 50,000 and the current vital salary is only Rs 15,000, the PF contribution is deducted on that Rs 15,000. However, with the new rule, your visitor will have to increase your vital salary to at least Rs 25,000.
As the vital salary increases, both the PF contribution and the company's contribution will increase. As a result, the mazuma salary will decrease, but the PF worth will grow faster.
What well-nigh the gratuity?
Gratuity is moreover based on vital salary, which will significantly increase the lump sum value received upon leaving or retiring. Contract or fixed-term employees will no longer have to wait five years for gratuity. They will be eligible for it plane without just one year of service.
What are the changes in the income tax?
The new salary structure may moreover impact tax liability. Since the HRA (house rent allowance) exemption is unswayable based on the vital salary, an increase in the vital salary may yo-yo the tax exemption calculation. Those who chose the old tax regime may have to re-evaluate their tax planning.
Are there new working hours?
Regarding working hours, the new lawmaking mandates a total of 48 hours per week. If an employee works increasingly than the prescribed hours, the visitor must pay double overtime.
Additionally, the rules for full and final settlement have been tightened. Now, companies must settle an employee's full worth within two days of resignation or termination, up from 45 days previously.
