The new labour codes of the government have come into effect from 1 April, 2026. As a result, your take-home salary from April 2026 could get lower.
The new labour laws are reshaping how your salary is credited each month. The government said that the primary reason for this change was to push more funds into long-term savings while focusing on reducing your monthly take-home pay. With this move, the Centre aims to help salaried individuals save up enough money for their retirement to sustain a healthy life following their superannuation. More funds in retirement funds also mean that one can withdraw higher amounts.
What is the new rule on salary?
The reforms have issued a “uniform definition of wages”, according to which wages now include basic pay, dearness allowance (DA), and retaining allowance. These three components must make up at least 50% of an employee’s total remuneration. At the same time, other components such as bonuses, HRA, and special allowances are classified as exclusions.
However, if these excluded components exceed 50% of the total salary, the excess amount must be added back to wages. This effectively raises the basic wage component for many employees.
Because several statutory benefits are calculated on wages, the change can increase employer and employee contributions to the Employees’ Provident Fund Organisation (EPF) and may also affect benefits linked to wage calculations under the Employees’ State Insurance Corporation (ESIC).
As a result, retirement and social security benefits such as provident fund, gratuity, and insurance coverage could increase, while take-home pay for employees may decline slightly due to higher deductions.
How much will your monthly salary change on ₹20 lakh CTC
Let’s assume that you have a CTC of ₹20 lakh. Here is how your monthly take home salary will change after the implementation of the labour laws —
| Component | Before ( ₹/month) | After ( ₹/month) | Change ( ₹/month) |
|---|---|---|---|
| Basic Pay | 63,333 | 79,167 | + ₹15,834 |
| HRA | 40,000 | 40,000 | — |
| Special Allowance | 47,400 | 31,566 | − ₹15,834 |
| Total Gross | 1,50,733 | 1,50,733 | — |
| EPF Deduction (Employee) | 7,600 | 9,500 | + ₹1,900 |
| EPF Contribution (Employer 12%) (part of CTC) | 7,600 | 9,500 | + ₹1,900 |
| Professional Tax | 200 | 200 | — |
| Net Take-Home | 1,42,933 | 1,41,033 | − ₹1,900 |
In this scenario, your take home salary drops by ₹1,900 per month. It must be noted that all these calculations are before tax. The actual salary may change when you factor taxes in.
Retirement savings increase
While this may seem like a bad thing in the short run, over the longer term, this will be beneficial for your retirement savings. You will be contributing ₹45,600 more per year to your provident fund. Meanwhile, your gratuity after just one year of service will increase to ₹45,673.
How to calculate your take home salary?
You can calculate your take home salary in a few seconds with the Mint salary calculator by clicking on this link https://www.livemint.com/tools-calculators/salary-impact-tracker. You can either upload your payslip or write your salary components manually. Then click on the “Calculate My Impact” button to view your take home salary changes instantly without any hustle.