Labour Code Salary

50% wage rule · Tax Year 2026-27

Salary · Labour codes

New Labour Code Salary Calculator

Since 21 November 2025, at least half of your pay must count as wages for PF and gratuity. If your basic is lower, your take-home usually dips and your PF and gratuity grow, even when your CTC stays the same.

Rules as of 9 October 2026 · Tax Year 2026-27 (Income-tax Act 2025)

1. Your salary today

From your payslip or offer letter

Amounts are

₹/ month

DA = dearness allowance, if your payslip shows it.

₹/ month
₹/ month

Also called flexi or balancing allowance.

₹/ month

Conveyance, LTA, phone, meal cards, reimbursements.

₹/ year

Optional. Kept out of PF, counted for tax.

2. PF and gratuity

How is your PF worked out today?

Take-home pay per month

Today

₹1,07,415

After the labour codes

₹1,03,067

−₹4,348 (−4.0%)

Your take-home falls by ₹4,348 a month. That money isn't lost: your PF and gratuity grow by ₹57,401 a year.

Your PF per month

₹5,040 → ₹7,033

PF + gratuity, extra per year

+₹57,401

Gratuity if you left today

₹1,45,385 → ₹2,02,862

Wages as a share of your pay (needs at least 50%)

Today
35%
After
50%

Your salary, line by line

Per month. CTC stays the same; the mix inside it changes.

Monthly salary structure today and after the labour codes
LineTodayAfterChange
Your pay
Basic + DA₹42,000₹58,605+₹16,605
HRA₹21,000₹21,000₹0
Special allowance₹52,000₹32,605−₹19,395
Other allowances₹5,000₹5,000₹0
Cash pay₹1,20,000₹1,17,209−₹2,791
Deductions
Your PF₹5,040₹7,033+₹1,993
Professional tax₹200₹200₹0
Income tax (new regime)₹7,345₹6,910−₹435
Take-home₹1,07,415₹1,03,067−₹4,348
Paid by your employer
Employer PF₹5,040₹7,033+₹1,993
Gratuity provision₹2,019₹2,818+₹798
Fixed CTC₹1,27,059₹1,27,059₹0

Annual CTC including variable pay: ₹16,74,711. Income tax here is on fixed pay; tax on variable pay is taken from it when paid.

Income tax per year

Tax Year 2026-27 (Income-tax Act 2025), including variable pay.

RegimeTodayAfter
Newyours₹1,11,540₹1,06,320
Old₹1,64,590₹1,52,890

After the change, the new regime costs you less, by ₹46,570 a year.

Over the years

Extra PF after 10 years

about ₹7,39,314

Your and your employer's extra PF at 8.25% interest, with no pay rises.

Gratuity if you left today

+₹57,477

6 counted years × 15/26 of monthly wages, capped at ₹20 lakh.

Worth knowing

  • Variable pay is kept out of the 50% test and PF, as most employers do. It is included in tax.

Questions to ask HR

  1. Has my salary structure been revised for the labour codes, and from which month?
  2. Which components do you count as wages: basic and DA only, or special allowance too?
  3. Is my PF worked out on full wages or capped at the statutory ceiling? Will the new ₹25,000 ceiling change it?
  4. Are employer PF and gratuity included in my CTC?
  5. Will my gratuity use the new wages for all my past years of service?
  6. Can I see my old and new salary structure side by side?

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What the new labour code changes in your salary

Employers can no longer keep basic pay small and pay the rest as allowances to cut PF and gratuity costs. If allowances such as HRA, special allowance and conveyance make up more than half of your pay, the extra is treated as wages anyway.

When your CTC stays the same, your employer's extra PF and gratuity come out of your allowances, and your own extra PF comes out of your take-home. The money is not lost: it moves into your PF account and your future gratuity.

How this calculator works

  1. Adds basic + DA, HRA, special allowance and other allowances to get your monthly cash pay.
  2. Checks whether basic + DA is at least half of that pay. If not, wages for PF and gratuity are lifted to the 50% line.
  3. Works out PF at 12% of wages for you and your employer (or of the capped wage if your company caps PF), and gratuity at 15/26 of monthly wages per year of service.
  4. Keeps your CTC the same: the employer's extra cost comes out of special allowance first.
  5. Calculates income tax for Tax Year 2026-27 (Income-tax Act 2025) in both regimes, then your monthly take-home.
Wages              = basic + DA, lifted to 50% of cash pay when allowances exceed half
PF (each side)     = 12% × wages   (or 12% × ₹25,000 if your PF is capped)
Gratuity per year  = 15/26 × monthly wages
Monthly provision  ≈ 4.81% of wages

Worked example

Take ₹42,000 basic + DA, ₹21,000 HRA, ₹52,000 special allowance and ₹5,000 other allowances: ₹1,20,000 a month in cash, and about ₹16.75 lakh CTC with a ₹1.5 lakh bonus. Basic is 35% of pay, below the 50% line.

At the same CTC, basic rises to ₹58,605 and special allowance falls to ₹32,605. PF rises from ₹5,040 to ₹7,033 a month on each side. Take-home falls by ₹4,348 a month, while PF and gratuity together grow by ₹57,401 a year. After 6 years of service, gratuity on leaving rises from ₹1,45,385 to ₹2,02,862.

What changed, and when

  1. 21 Nov 2025

    The four labour codes came into force. The 50% wage rule now decides PF and gratuity, and fixed-term staff get gratuity after 1 year.

  2. 1 Apr 2026

    The Income-tax Act 2025 and Income-tax Rules 2026 took effect. Slabs stayed the same, and Bengaluru, Hyderabad, Pune and Ahmedabad joined the 50% HRA list.

  3. 17 Sep 2026

    The PF wage ceiling rose from ₹15,000 to ₹25,000 a month (Cabinet decision).

Frequently asked questions

Related tools and guides

Rules used and sources

Educational estimate, not tax, legal or investment advice. Your employer's payroll decides the actual figures. The Financial Vines is an education brand; co-founder Himani Chaudhary is an AMFI-registered mutual fund distributor (ARN-283063).

Take-home after

₹1,03,067 / month

Change

−₹4,348