New labour codes · FY 2026-27

How the 50% wage rule changes your payslip

Under the Code on Wages 2019 (notified 21 Nov 2025), Basic + DA must be at least 50% of total remuneration. See exactly how that shifts PF, gratuity and take-home pay.

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Typical pre-2026 structure

Before · Basic 40% of CTC

Basic (annual)₹6,00,000
HRA₹3,00,000
Special / others₹5,78,400
Employer PF₹21,600
Gross₹14,78,400
Employee PF-₹21,600
TDS-₹94,130
Annual in-hand
₹13,60,270
Gratuity provision: ₹28,846 per completed year of service
Wage-code compliant

After · Basic 50% of CTC (Code on Wages)

Basic (annual)₹7,50,000
HRA₹3,75,000
Special / others₹3,53,400
Employer PF₹21,600
Gross₹14,78,400
Employee PF-₹21,600
TDS-₹94,130
Annual in-hand
₹13,60,270
Gratuity provision: ₹36,058 per completed year of service

What changed for this CTC

Employee PF
+₹0
per year
Annual take-home
+₹0
vs. 40% basic structure
Gratuity / year of service
+₹7,212
builds retirement faster

The Code on Wages 2019 was notified on 21 November 2025 (along with the three other labour codes) and is operational from FY 2026-27. The proviso to Section 2(y) deems any allowances exceeding 50% of total remuneration as part of "wages" — pulling them into the PF, ESI, gratuity and bonus computation base.

Income Tax Act 2025 — what's different for payroll

All non-salary TDS is now consolidated into Section 393 with three internal tables — residents (8 entries), non-residents (17 entries) and any-person (7 entries). Salary stays in its own Section 392. Each table entry carries a 4-digit payment code in the range 1001-1092 that replaces the old section number on Form 26Q / TRACES returns. Rates and thresholds carry forward from the 1961 Act largely unchanged.

Section 192 (salary)→ Section 392 · code 1001
Section 87A (rebate)→ Clause 156 (₹60k ≤ ₹12L)
Section 194A (interest)→ 393(1) · Sl. 5 · code 1003
Section 194C (contractors)→ 393(1) · Sl. 6(i) · code 1017
Section 194J (professional fees)→ 393(1) · Sl. 6(ii) · code 1020
Section 194H (commission)→ 393(1) · Sl. 1 · code 1007
Section 194I (rent)→ 393(1) · Sl. 2 · code 1008/1009
Section 194-IA (immovable property)→ 393(1) · Sl. 3 · code 1012
Section 194O (e-commerce)→ 393(1) · Sl. 7 · code 1029
Section 194Q (purchase of goods)→ 393(1) · Sl. 7 · code 1037
Section 194S (VDA)→ 393(1) · Sl. 8 · code 1040
Section 194T (firm partner)→ 393(1) · Sl. 7 · code 1041
Section 195 (non-resident)→ 393(2) · Sl. 1 · code 1050
Section 194N (cash withdrawal)→ 393(3) · Sl. 1 · code 1060
Section 194P (senior citizen)→ 393(3) · Sl. 2 · code 1061
Section 206C series (TCS)→ Section 394
Form 16→ Form 130
Form 12BB (regime opt-out)→ Form 122
Previous + Assessment Year→ Tax Year

FastLegal Payroll cites the right reference on every payslip, invoice and Form 16/130 automatically based on the payment date — including the Section 393 table entry and TRACES payment code for non-salary TDS.

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