How the New Labour Code’s 50% wage rule could cut tax, tweak your monthly take

The New Labour Code 2025, which came into effect last month, has reshaped how salaries are structured. Under the new rules, basic pay, dearness allowance and retaining allowance must together make up at least 50% of an employee’s CTC. The government says this uniform formula will make calculations for gratuity, pension and other social-security benefits more consistent. Advertisement

While it may look like a backend policy shift, the impact will be very real for employees. Statutory contributions will change, tax deductions will shift, and both take-home pay and long-term savings may look different depending on the salary bracket.

Chartered Accountant Dr. Suresh Surana explained that the new definition of “wages,” as provided under Section 2(y) of the Code on Wages, 2019 and the Code on