How Is Salary Calculated Under the New Labour Code 2026?
Confused by your new payslip? Here's a simple, jargon-free breakdown of how your salary is now split between take-home pay, PF, and gratuity under the latest rules.
The 4-Step Salary Calculation
Step 1
Start With Your CTC
Your Cost to Company (CTC) is the total amount your employer spends on you per year. This number does not change under the new labour code. Example: ₹12,00,000/year.
Step 2
Apply the 50% Wage Rule
Your basic salary (wages) must now be at least 50% of CTC. If your current basic is 30% (₹3,60,000), it gets bumped to 50% (₹6,00,000). The difference comes out of your allowances — HRA, special allowance, etc. shrink proportionally.
Step 3
Calculate Deductions on the New Basic
All statutory deductions are percentages of your basic salary:
- Employee PF: 12% of new basic
- Employer PF: 12% of new basic (not deducted from your pay, but uses CTC budget)
- Gratuity accrual: (Basic ÷ 26) × 15 days per year of service
- Professional Tax: ~₹200/month (varies by state)
Step 4
What Lands in Your Bank
Take-home = CTC − Employee PF − Employer PF − Professional Tax. Because PF contributions are now calculated on a much larger basic, more money flows into your retirement fund and less into your monthly bank transfer.
Take-Home = ₹12,00,000 − ₹72,000 − ₹72,000 − ₹2,400 = ₹10,53,600/yearTry It Yourself
Current Monthly CTC
₹83,333
State wage floor used
₹20,358/month
Annual CTC band
10L
New wage base
₹41,667/month
New Monthly Take-Home
Calculated for Delhi with a IT/ITES salary structure.
Annual Impact Overview:
Over a year, take-home changes by ₹24,000. Your PF corpus grows by ₹12,000 a year more, and your gratuity accrual increases by ₹400.65 each month.
| Component | Old Structure | New Structure |
|---|---|---|
| Basic | ₹33,333 | ₹41,667 |
| HRA | ₹16,667 | ₹20,833 |
| PF (employee) | ₹4,000 | ₹5,000 |
| PF (employer) | ₹4,000 | ₹5,000 |
| Gratuity accrual | ₹1,603 | ₹2,003 |
| Professional Tax | ₹200 | ₹200 |
| Net Take-Home | ₹75,133 | ₹73,133 |
Last updated: 30 March 2026
Compare with a friend
Share this calculator with a colleague to compare how different CTC bands are affected.
Step 1: Establish Current Structure
We take your Annual CTC and multiply by your current Basic % to get your existing Basic Salary.
Step 2: Apply 50% Wage Rule
Under the new code, Basic Salary must be at least 50% of CTC. We also check if the state minimum wage is higher and use whichever is greater.
New Basic = max(CTC × 50%, State Minimum Wage × 12)Step 3: Recalculate Deductions
PF: Basic × 12% (employee + employer match)
Gratuity: (Basic ÷ 26) × 15 days per year
Professional Tax: ₹200/month (standard estimate)
Step 4: Compute Take-Home
Take-Home = CTC − Employee PF − Employer PF − Professional Tax