From April 1, 2026, India’s new Labour Code mandates basic salary to be at least 50% of CTC, curbing high allowances (previously 70-80%) to cut tax liability. Companies must restructure slips; higher basic pay boosts PF/gratuity savings but may trim take-home pay and tweak HRA/tax under old regime. New regime impact is minimal.
Why is your salary structure in focus
Under the new Income Tax Rules, 2026, most benefits provided by employers now have a clearly defined taxable value. Earlier, some perks were loosely defined, allowing companies flexibility in designing salary packages. The new rules reduce that flexibility.
This means employers may restructure salary components such as allowances, reimbursements, and perks to ensure compliance with the new valuation rules. As a result, even if your CTC does not change, the proportion of basic salary, allowances, and taxable perks may be different from April 2026.