Salary Structure Under New Wage Codes & Income Tax Act 2025

Summary of Salary Structuring Under New Wage Codes and Income Tax Act 2025

Summary: The article provides an integrated framework for salary structuring under the four Wage Codes stated to be effective from 21 November 2025 and the Income Tax Act, 2025 stated to apply from 1 April 2026. It explains commonly used salary components, CTC, PF, ESI, gratuity, professional tax and other statutory implications, and discusses the stated 50% wage rule under the Code on Wages. It outlines the tax treatment of allowances and perquisites, compares the old and new tax regimes, and identifies deductions and exemptions stated to remain available or unavailable under the new regime. The article provides illustrative salary structures for CTC levels of ₹8 lakh, ₹12 lakh and ₹20 lakh, recommends considering employer NPS contributions, and suggests reviewing salary structures according to employees’ tax-regime preferences. It also recommends that employers review existing structures, use flexible benefit plans, communicate social-security benefits and provide alternative structures, while employees should compare total rewards and tax regimes. The article concludes that salary structures should address compliance, taxation and social-security benefits together.

Salary Structure under New Wage Codes & Income Tax Act 2025: – Complete Guide for HR & Accounts Professionals

WHAT IS IN

• Tax Year w.e.f. 01-04-2026, as per the “Income Tax Act, 2025”
• All four wage codes e.f. 21-11-2025 – “Code on Wages, 2019” Industrial Relations Code, 2020 • Code on Social Security, 2020 • Occupational Safety, Health and Working Conditions Code, 2020

WHAT IS OUT

• Previous Year, Assessment Year have gone, live till 31-03-2026 (last Assessment Year is 2026-27); The year 2026-27 is Assessment Year for Income Tax, Act 1961 and Tax Year for Income Tx Act, 2025:
• All 29 old Labour Laws like PF, ESI, Gratuity, LWF etc have gone, effective till 20^th Nov, 2025:

Salient Features of Salary Structure Article

1. Commonly used Salary Structure in the Industry

2. Impact of the Newly Implemented Wage Codes on Salary Structures (w.e.f. 21st November 2025)

3. Income Tax Implications of Salary Components – Taxable Elements, Exemptions and Rebates under the Income Tax Act, 2025

4. Comparative Benefits of Old vs. New Tax Regime effective from 1st April 2026

5. Suggested Model Salary Structures (Integrated Framework)

6. Key Modalities and Compliance Requirements under the New Wage Codes (effective 21st November 2026)

Integrated Approach to Salary Structuring Under Wage Codes and Income Tax Act

While the subjects of Salary Structure and TDS computation have been extensively discussed by various authors, I strongly believe that a comprehensive integration of the new Wage Codes (effective 21.11.2025) and the Income Tax Act, 2025 (effective 01.04.2026) in one place is essential. In practice, HR professionals are often not fully conversant with the latest income tax provisions, while the Accounts/Finance team tends to work with pre-designed, stereotypical salary structures received from HR. Consequently, TDS on salaries is computed without optimally leveraging available exemptions and deductions, resulting in higher tax burden on employees.

The Accounts department usually processes the salary structure as received and rarely re-examines it from a tax optimization perspective. My experience suggests that, although HR and Accounts function within the same organization, they often operate in silos with limited synergy.

It is with this objective — and in the larger interest of the organization as well as its employees — that I have attempted in this article to provide an integrated framework covering both the Wage Codes and the Income Tax Act, 2025. The aim is to enable both departments to achieve optimal outcomes without requiring constant cross-functional coordination.

Commonly Used Salary Structures in Industry

You may have come across numerous salary slips and structures commonly used in the industry. However, with the implementation of the new Wage Codes (w.e.f. 21.11.2025) and the Income Tax Act, 2025 (w.e.f. 01.04.2026), it has become essential to review and redesign them. The following list is inclusive but not exhaustive. While some components may already be familiar, others are intended to provide fresh ideas and insights for designing more effective, compliant, and tax-efficient salary structures.

i. Basic Salary

ii. Dearness Allowance (maybe not private organizations)

iii. Allowances

a. House Rent Allowance

b. Leaves

c. Bonus

d. Entertainment

e. Special

i. Tour & Travel

ii. Conveyance

iii. Helper

iv. Academic research & other professional pursuits

v. Uniform/Attire

vi. Compensatory Allowance – hills/mines etc

vii. Children Education

viii. Hostel

ix. Compensatory field allowance – medical raps etc

x. Transport Allowances

xi. Magazine/books & periodicals

xii. Armed forces

f. Tiffin

g. Fixed Medical

h. Servant Allowance

i. Foreign citizen

j. Compensatory – under article 222(2) of The Constitution

k. Teacher

l. Sumptuary Allowances to Judges

Perquisites

iv. Perquisites:

a. Furnished/un-furnished house without rent or concessional rent

b. Service of sweeper

c. Service of gardener

d. Service of watchman

e. Service of personal attendant

f. Supply of gas

g. Supply of electricity

h. Supply of water

i. Education facility for employee families

j. Leave travel concession LTC

k. Amount paid by the employer of an obligation that was otherwise payable by the employee

l. Premiums of LIC or other sums

m. Interest-free/concessional loans

n. Use of movable assets – like cars etc

o. Medical Facility

p. Car or any other automotive conveyance

q. Transport facility by the transport company

r. Free food or beverages

s. Traveling, Touring accommodation

t. Gift or gift vouchers

u. Credit Cards

v. Club

w. The tax of employees paid by the employer

x. ESOP shares allotment etc

y. Employer contribution towards RPF/NPS if in excess of 7.5 lacs per annum

z. Annual accretion to the employer’s contribution if in excess of 7.5 lacs

aa. Any other benefits/services/amenities provided by employer FOC by any name.

Understanding CTC (Cost to Company)

Most employees focus only on the amount that gets credited to their bank account. However, CTC represents the total cost borne by the employer, which includes several components that do not directly reflect in the employee’s take-home salary.

During salary negotiations, this distinction becomes particularly important. Candidates typically seek at least a 30% increase over their previous salary, while employers often highlight that the offered CTC is significantly higher (more than 30%) when compared to the candidate’s last drawn salary.

How is Cost to Company (CTC) Calculated in Salary

CTC = Direct Benefits + Indirect Benefits + Savings Contributions

• Direct Benefits: This refers to the employee’s take-home or net salary or the amount paid to the employee monthly by the employer and is subject to government taxes.
• Indirect Benefits: These refer to the benefits that employees enjoy without paying for them. While the company pays them on behalf of the employee they are added to the employee’s CTC since it is an expense from the company’s point of view.
• Savings Contribution: This refers to the monetary value added to the employee’s CTC, for e.g.: EPF employer contribution, etc.

Most Overlooked Aspect of CTC by Employees

One of the most important yet often ignored aspects of CTC is the tax optimization built into the salary structure by prudent employers. A well-designed salary structure, prepared by experienced tax professionals, can significantly reduce the employee’s tax liability without increasing the overall cost to the company.

For Example:

Mr. Rohit, a Senior Executive at XYZ Ltd., has the flexibility to adopt an optimized salary structure under the old tax regime. By restructuring his salary components appropriately, he can save approximately ₹15,000 per month in taxes compared to his previous employer. This translates into an additional annual tax saving of ₹1.80 lakhs — a hidden but substantial benefit that does not increase the company’s CTC.

Key Takeaway

Employees should carefully evaluate not just the CTC figure, but also the quality of the salary structure. Employers, on their part, should transparently highlight such tax-saving benefits during discussions. This helps employees truly appreciate the employer’s effort towards protecting and enhancing their take-home income and long-term wealth.

Salary Structures and Implications of ESI, PF, LWF and Professional Tax

The Indian government, as well as young employee strength, is not believing in conventional savings plans, and carrying home cash salary is a hot topic in “lunch room discussions”.

As per the statute, the maximum limit of salary where employer/employee is not bound to deduct ESI/PF is Rs.21,000/-(proposed Rs.25000/-) & Rs.15,000/-(proposed Rs.25000/-) respectively – now here salary means – Basic + DA and no split of minimum wages.

Here prudency lies sometimes in employee salary coming within limits of statutory compliance then to keep them out of compliance if the salary negotiated is Rs.20,000/- then it is already above PF limit but within ESI limit so if it bargains Rs.21,100/- then for both compliance employer got free. At, the same time there is a loss of 13% of salary up to 15k as employer share in PF as well interest thereon given by Govt. of India & ESI benefits of notified hospitals as well salary compensation in any mishappening by ESI.

The way you calculate the liability of PF comes different it can be better understand by my two earlier articles on the same – links are provided below:

Sample Salary Structures (Post 21.11.2025)

CTC ₹8 Lakhs p.a. – Suitable for New Tax Regime

Component	Old Style (Pre-2025)	New Compliant Structure	Remarks
Basic Pay	₹2,40,000 (30%)	₹4,00,000 (50%)	Higher PF & Gratuity
HRA / Special Allowance	₹3,60,000	₹3,00,000	Within 50% limit
Other Allowances	₹1,00,000	₹1,00,000	Food, Conveyance etc.
Employer PF (12%)	₹28,800	₹48,000	+₹19,200 benefit
Gratuity (4.81%)	₹11,544	₹19,240	Higher long-term benefit
Take-Home (Approx.)	₹6,50,000	₹6,30,000	Slightly lower but better future security

Recommendation: Prefer New Tax Regime – Income up to ₹12 lakh is effectively tax-free (rebate u/s 87A + standard deduction).

CTC ₹12 Lakhs p.a. – Zero Tax Threshold in New Regime

Component	Old Style	New Compliant Structure	Remarks
Basic Pay	₹3,60,000 (30%)	₹6,00,000 (50%)	Core wages
HRA	₹4,00,000	₹4,00,000	Exempt in Old Regime
Special / Other Allowances	₹1,40,000	₹1,00,000	Flexible
Employer PF	₹43,200	₹72,000	Significant increase
Gratuity	₹17,316	₹28,860	Long-term gain
Take-Home (Approx.)	₹9,80,000	₹9,50,000	Better overall value

CTC ₹20 Lakhs p.a. – Regime Choice Critical

Component	New Compliant (New Regime Focus)	New Compliant (Old Regime Focus)
Basic Pay	₹10,00,000 (50%)	₹8,00,000 (40%)
HRA	₹5,00,000	₹7,00,000
Special Allowance	₹3,00,000	₹3,00,000
Employer PF (12%)	₹1,20,000	₹96,000
Gratuity (4.81%)	₹48,100	₹38,480
NPS (Employer, optional)	₹2,80,000 (14%)	₹2,80,000
Take-Home (Approx.)	₹15,80,000	₹15,90,000

Key Insight: For CTC above ₹12 lakhs, compare both regimes annually. Old Regime may be better if employee has high deductions (80C, 80D, HRA).

Practical Suggestions for Maximum Salary Benefits

For Employers

– Offer flexible / cafeteria salary structures.

– Clearly mention tax-saving and social security benefits in offer letters.

– Use NPS (u/s 80CCD(2)) liberally — it is allowed even in the New Tax Regime.

For Employees

– Evaluate Total Rewards (Take-home + PF + Gratuity + NPS) instead of just in-hand salary.

– Negotiate for optimized structures based on your chosen tax regime.

– Higher Basic Pay may reduce take-home slightly but significantly boosts long-term wealth.

Likewise “Professional Tax” is state matters and in many states, a certain level of employees are exempt from professional tax, therefore, this can be also term a saving plan for employers if they keep employees’ salaries within limits.

Salary Components Attracting Income Tax and Applicable Provisions

A very basic principle of Income Tax is that- what else is being given by an employer is exclusively for the necessity of performing his duties and being utilized in performing duties that is non-taxable. This is defined in the case of “allowances”.

If you see carefully the list of allowances provided at the start of this article then you will find a rider with all allowances value of taxability – if fully used for official duties fully exempted from tax and if partial then partially taxed and if not at all utilized for official duties, then it is fully taxable.

You can better understand by a few examples – uniform, gardener, helper, car, etc

Uniform or Attire Allowance

$ Uniform – Mostly this term is being used as “attire allowance” – if your office culture and part of HR policy as well it has defined uniforms and you are being reimbursed for the same then it is not taxable. Now, think above it – actually, this is a part of informal CTC because your daily wear expenses are cut short up to substantial cost i.e. for 26 days job you at least use 12 pairs of clothes as well shoes/sweater/jacket, etc which costs you thousands of rupees as well you get relived from the tension of standing Infront of wardrobe – what to wear today or क्या पहनू कल तो यही पहना था really it is a big relief.

Gardener Allowance

$ Gardener – Suppose, you live in a private colony or bungalow of your own and the company is providing you with a gardener – taxable. If, as a term of employment you are bound to maintain the lawn in front of your house and client meets, etc happened often and it is the demand of your work then up to a certain limit it is non-taxable. Therefore, it should be properly documented – here HR’s responsibility comes to give confidence to accounts for not deducting tax on it and adequately supported tax authorities also.

Car With or Without Chauffeur

$ Car with chauffeur or not – Yes, it is taxable if used for personal purposes but for official it is not. Here again, the role of HR & Admin comes very prominently – what is that?

That is – in contract papers, everything should be mentioned and if not in the main contract, then there should be an addendum to that for all kinds of facilities that are being given for official use and necessary for official duties that should be mentioned – purpose, facility to be used, quantity, periodicity, etc.

Further, what is the admin role- adequate support like log-books of car, mileage control, places visited, signatures at proper place and then authorization, attendance of drivers, gardener helper etc.

Further, if you see a perquisite site then it is taxable but if components of salary keep in the correct place, then it saves taxes – because tax is based mostly on Basic Salaries like a free house or HRA somewhere it is linked with salary. So, a good combination of HR & Accounts will certainly help to tax savings of employees.

Old and New Income Tax Regimes From 1 April 2026

Before going to explain the benefits of the new regime, understand the tax slabs of the old and new regimes. The new regime of taxation to attract more employees, Govt has come with new modifications in the new tax regime w.e.f. 1/4/2026:

New Tax Regime (Default Regime)

Total Income (₹)	Tax Rate
Up to 4,00,000	Nil
4,00,001 – 8,00,000	5%
8,00,001 – 12,00,000	10%
12,00,001 – 16,00,000	15%
16,00,001 – 20,00,000	20%
20,00,001 – 24,00,000	25%
Above 24,00,000	30%

Key Features of New Regime

• Rebate under Section 87A: Up to ₹60,000 → Taxable income up to ₹12 lakh is effectively tax-free for resident individuals.
• Standard Deduction: ₹75,000 (for salaried/pensioners) → Effective tax-free income up to ≈ ₹12.75 lakh for salaried persons.
• Same slabs apply to all individuals (including senior & super-senior citizens) — no age-based higher exemption.
• Most deductions/exemptions (80C, 80D, HRA, LTA, etc.) are not available.

Old Tax Regime (Optional)

Total Income (₹)	Below 60 years	Senior Citizen (60–79 years)	Super Senior (80+ years)
Up to 2,50,000	Nil	Nil	Nil
2,50,001 – 3,00,000	5%	Nil	Nil
3,00,001 – 5,00,000	5%	5%	Nil
5,00,001 – 10,00,000	20%	20%	20%
Above 10,00,000	30%	30%	30%

Key Features of Old Regime

• Full range of deductions & exemptions available (80C, 80D, HRA, home loan interest, etc.).
• Standard Deduction: ₹50,000.
• Rebate under Section 87A: Up to ₹12,500 (tax-free up to ₹5 lakh).

Surcharge Under Both Regimes

Total Income	New Regime	Old Regime
Up to ₹50 lakh	Nil	Nil
₹50 lakh – ₹1 crore	10%	10%
₹1 crore – ₹2 crore	15%	15%
₹2 crore – ₹5 crore	25%	25%
Above ₹5 crore	25%	37%

Exemptions and Deductions Not Available Under New Tax Regime

Here pertinent to note in the new regime you have to forget all deductions in salary – except the standard deduction of Rs.75,000/- is allowed now what you lose in the new regime is as under:

List of common Exemptions and deductions ” not allowed” under the New Tax rate regime

• Leave Travel Allowance (LTA)
• House Rent Allowance (HRA)
• Conveyance allowance (Only pure official reimbursement (not taxable as income) is exempt).
• Daily expenses in the course of employment
• Relocation allowance
• Helper allowance
• Children education allowance
• Other special allowances [Section 10(14)]
• Professional tax
• Interest on housing loan (Section 24) if not rented property
• Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2))

Deductions Allowed Under New Tax Regime

List of deductions “allowed” under the new Tax rate regime

• Standard Deduction → ₹75,000
• Employer’s contribution to NPS → 80CCD(2) (up to 14% of salary)
• Interest on housing loan for let-out property
• Family pension deduction
• Agniveer Corpus Fund contribution (80CCH)
• Transport allowance for specially-abled persons
• Certain official reimbursements (actual expenses for official duties)
• Exemptions such as gratuity, leave encashment, VRS, etc. (subject to conditions)

Even you will not get the benefit of section 24(i) of the Income Tax Act for interest on housing loans. Principal paid on housing loan shall not be allowed to include in 80C limit.

Now this is you and your age/salary/employer etc where you have to decide your tax liability. If savings are more and you have loan repayment for the self-occupied property then it is not recommended to switch new era of tax otherwise better to switch and accordingly calculate your TDS and timely inform to your employer.

Comparative Tax Impact of Old and New Regimes

A comparative table for your reference – from tax point of view:

Particulars	Old Tax Regime	New Tax Regime	New Tax Regime
		(until 31st March 2023)	(From 1st April 2026 / Tax Year 2026-27)
Income level for rebate eligibility	₹ 5 lakhs	₹ 5 lakhs	₹ 12 lakhs
Standard Deduction	₹ 50,000	–	₹ 75,000
Effective Tax-Free Salary income	₹ 5.5 lakhs	₹ 5 lakhs	₹ 12.75 lakhs
Rebate u/s 87A	₹ 12,500	₹ 12,500	₹ 60,000
HRA Exemption	✓	X	X
Leave Travel Allowance (LTA)	✓	X	X
Other allowances including food allowance (now Rs 200/meal subject to 2 meals a day)	✓	X	✓
Standard Deduction (Rs 75,000 under New / Rs 50,000 under Old)	✓	X	✓
Entertainment Allowance and Professional Tax	✓	X	X
Perquisites for official purposes	✓	✓	✓
Interest on Home Loan u/s 24b on: Self-occupied or vacant property	✓	X	X
Interest on Home Loan u/s 24b on: Let-out property	✓	✓	✓
Deduction u/s 80C (EPF | LIC | ELSS | PPF | FD | Children’s tuition fee etc)	✓	X	X
Employee’s (own) contribution to NPS	✓	X	X
Employer’s contribution to NPS	✓	✓	✓
Medical insurance premium – 80D	✓	X	X
Disabled Individual – 80U	✓	X	X
Interest on education loan – 80E	✓	X	X
Interest on Electric vehicle loan – 80EEB	✓	X	X
Donation to Political party/trust etc – 80G	✓	X	X
Savings Bank Interest u/s 80TTA and 80TTB	✓	X	X
Other Chapter VI-A deductions	✓	X	X
All contributions to Agniveer Corpus Fund – 80CCH	✓	It was not earlier	✓
Deduction on Family Pension Income	✓	✓	✓
Gifts upto Rs 15,000	✓	✓	✓
Exemption on voluntary retirement 10(10C)	✓	✓	✓
Exemption on gratuity u/s 10(10)	✓	✓	✓
Exemption on Leave encashment u/s 10(10AA)	✓	✓	✓
Daily Allowance	✓	✓	✓
Conveyance Allowance	✓	✓	✓
Transport Allowance for a specially-abled person	✓	✓	✓

Suggested Model Salary Structure

An idea of standard pay salary break up is as under:

Components	Recommendation
Basic	50% of CTC
DA	5 % of CTC (can keep 45% basic if DA is given)
HRA	50% of Basic + DA if metro and 40% if non-metro
Conveyance	Rs. 1600 per month – Tax benefit gone
Medical	Rs. 1250 per month – Tax benefit gone
LTA	10% of basic (no benchmark)
ESIC (Employer Contribution)	4.75% of Gross salary
ESIC (Employee Contribution)	1.75% of Gross salary
Special	Balancing component
PF (Employer contribution)	12% of Basic + DA
PF (Employee Contribution)	12% of Basic + DA
Professional Tax	State-wise
Labor welfare fund	State-wise
Perquisites	As per the table given in this Article

This is a conventional structure but not reconciling with my reason to write this article. Here is what I am trying to explain how your structure will help you in saving your tax liability for example if you keep the HRA component with reasonable care will give you the least amount as exemption with maximum benefit – i.e. 10% of salary or 50% of salary or actual rent or excess of rent paid over the 10% of salary whichever is lower so can salary structure redefined.

Or you can keep the terms of your employment in such a manner that can include your salary components as part of your contract well defined and eligible for tax exemption like in the case of allowances which are non-taxable if correctly defined in terms of employment.

Tax Regime Choice Based on Deductions

A little idea of the new tax regime and the old tax regime is given in below:

• When total deductions are ₹1.5 lakhs or less: New regime will be beneficial
• When total deductions are more than ₹3.75 lakhs: Old regime will be beneficial
• When total deductions are between ₹1.5 lakhs to ₹3.75 lakhs: Will depend on various income levels
• What deductions and exemptions are allowed under the new tax regime?

Emerging Trends in Salary Structuring Under New Wage Codes and Income Tax Act 2025

The implementation of the four Labour Codes — particularly the Code on Wages, 2019 — and the Income Tax Act, 2025 has fundamentally changed how salary structures are designed in India. The most significant shift is the uniform definition of “wages” and the mandatory 50% rule, which aims to strengthen social security while offering opportunities for tax optimization. Employers and employees who adapt proactively can achieve maximum benefits under both labour laws and taxation provisions.

Key Change: New Definition of Wages and the 50% Rule

Under the new Code on Wages, “wages” primarily include:

– Basic Pay

– Dearness Allowance (DA)

– Retaining Allowance

Exclusions (such as House Rent Allowance, special allowances, overtime, bonus, commission, etc.) are permitted, but they cannot exceed 50% of total remuneration. If exclusions cross 50%, the excess amount is added back to “wages” for computation of PF, Gratuity, ESI, Bonus, and other benefits.

Trend: Most progressive organizations are now setting Basic Pay + DA at 50% of CTC as standard practice. This replaces the earlier practice of keeping basic pay at 30–40%.

Impact on Major Statutory Benefits

– Provident Fund (PF): Employee & Employer contribution remains 12% each, but now calculated on a higher wage base (due to increased Basic Pay). This results in a larger retirement corpus for employees.

– Gratuity: Payable under the Code on Social Security. Calculation is now on the expanded “wages” base. Fixed-term employees become eligible after just one year of service (improved from five years earlier).

– ESI: Coverage threshold continues at ₹21,000 per month (subject to notifications). Higher wages may bring more employees into ESI benefits.

– Bonus: Statutory bonus will also be computed on the revised higher wages.

For Employees: Higher long-term social security benefits (especially PF and Gratuity).

For Employers: Increased statutory cost but better compliance and reduced litigation risk.

Salary Structuring Trends for Different CTC Levels

A. CTC up to ₹12 Lakhs per annum

– In the New Tax Regime (default under Section 115BAC of Income Tax Act, 2025), income up to ₹12 lakhs effectively becomes tax-free due to enhanced rebate under Section 87A and increased standard deduction (₹75,000 for salaried individuals).

– Recommended Structure:

– Basic Pay: 50% of CTC

– HRA / Special Allowance: Up to 40–45%

– Other flexible components (Food, Conveyance, etc., as per company policy)

– Strategy: Maximize exemptions still available in New Regime (e.g., employer’s contribution to NPS u/s 80CCD(2) up to 14% of salary). Employees in this bracket should prefer the New Regime for simplicity and zero tax.

B. CTC above ₹12 Lakhs per annum

– Higher slabs in New Regime (15%, 20%, 25%, 30%) apply progressively.

– Employees have a real choice between Old Tax Regime (with deductions u/s 80C, 80D, HRA u/s 10(13A), etc.) and New Tax Regime.

– Trend: Employers are designing flexible structures allowing employees to choose components based on their tax regime preference.

– In Old Regime: Retain meaningful HRA, LTA, Children Education Allowance, and other exemptions.

– In New Regime: Focus on higher Basic (for PF/Gratuity) + NPS contribution + standard deduction.

Suggestion to Employers: Offer two model structures — one optimized for New Regime (higher social security, simpler) and one for Old Regime (maximum exemptions). This helps attract and retain talent.

Practical Suggestions for Maximum Benefits

For Employers:

– Immediately review and restructure all existing salary structures to comply with the 50% wages rule.

– Introduce flexible benefit plans (cafeteria approach) within the 50% exclusion limit.

– Clearly communicate the “hidden benefits” (higher PF, Gratuity) to employees during offer letters and appraisals.

– Consider NPS as a strong tool for tax-efficient compensation (especially u/s 80CCD(2) in New Regime).

For Employees:

– Do not focus only on take-home salary — evaluate the total reward including employer contributions to PF, Gratuity, and NPS.

– Compare Old vs New Tax Regime every year before finalizing salary breakup.

– Negotiate for higher Basic Pay where long-term benefits matter more than immediate cash flow.

– Understand that a slightly lower take-home due to higher PF is actually building your retirement wealth.

Conclusion and Remarks on Strategic Salary Structuring

The New Wage Codes and Income Tax Act, 2025 together promote transparency, stronger social security, and simplified taxation. Organizations that redesign salary structures thoughtfully will not only ensure full compliance but also gain a competitive edge in talent acquisition. Employees who understand these nuances can significantly enhance their net wealth — both today and in the future.

A well-balanced salary structure is no longer just about compliance — it is a strategic tool for mutual benefit. Employers and HR teams are strongly advised to consult their tax and labour law professionals to customize structures based on specific industry and employee profiles.