With effect from 1 April, the start of the 2026–27 financial year, salaried employees in India will see major changes in how their pay is structured. The government’s new labour codes require that at least half of an employee’s total salary must be counted as “basic wages.”
This change directly impacts provident fund (PF) contributions. Since PF is calculated on the basic wage, a higher share of salary under this category means bigger deductions. While this boosts retirement savings, it reduces the monthly in-hand salary for workers.
House Rent Allowance (HRA) rules are also being revised, which could affect how employees claim tax benefits. Together, these changes alter the balance between immediate take-home pay and long-term savings.
The new financial year also brings other updates that indirectly affect salaried individuals. The Income Tax Act, 1961 is being replaced by the Income Tax Act, 2025, introducing new filing norms and compliance requirements. PAN regulations are being updated, and banks are revising transaction charges. For example, HDFC Bank will now charge Rs 23 per UPI cash withdrawal at ATMs after five free transactions.
Beyond banking and taxes, everyday expenses may rise with hikes in FASTag annual pass fees and new ticketing rules from Indian Railways.
In short, 1 April marks a turning point for employees: while retirement savings will grow under the new wage rules, monthly disposable income is set to shrink. Understanding these changes is crucial for workers to plan their finances in the year ahead.
