The Income Tax Act, 2025 (along with the Income Tax Rules, 2026) replaced the six-decade-old Income Tax Act, 1961 on 1st April 2026. Simultaneously, India’s Four Labour Codes are fully notified and ready to be implemented at any moment.

Together, these changes affect your take-home pay, your tax liability, your leave entitlements, your social security, and your fundamental rights as an employee. Some of these changes put more money in your pocket. Some take a bit out. This post walks you through what matters — plainly and practically.

Part I: The Four Labour Codes — Your Rights at Work Are Changing

India’s fragmented labour law landscape has been consolidated into four comprehensive Codes. Here’s what each one means for you.

1. The Code on Wages, 2019

This is the most directly impactful code for your monthly pay.

• A new, unified definition of “Wages”: Wages must constitute at least 50% of total CTC. If your basic + DA is currently lower, expect a restructuring.
• A wider bonus entitlement: Eligibility for statutory bonus may extend to more employees as wage ceilings are revised upward.
• Equal wages across gender: This is now a statutory right, mandating equal remuneration for similar work.
• Timely payment: Wage payment timelines are now codified with strict penalties for delays.

2. The Industrial Relations Code, 2020

• Fixed-term employment recognition: Fixed-term employees are now entitled to all statutory benefits (gratuity, PF, ESI) on par with permanent employees.
• Standing Orders: Establishments with 300+ workers must maintain certified standing orders.
• Reskilling Fund: Introduces a National Reskilling Fund for retrenched workers.

3. The Code on Social Security, 2020

• Gratuity for fixed-term workers: Entitled to gratuity on a pro-rata basis, even without completing five years.
• Gig and platform workers: For the first time, delivery partners, cab aggregators, and freelancers are included in the social security framework.
• Maternity benefit: The 26-week paid maternity leave is codified under the new framework.

4. Occupational Safety, Health and Working Conditions Code, 2020

• Working hours & Overtime: Overtime wages beyond limits must be paid at twice the ordinary rate.
• Women in the workforce: Women may now work night shifts with consent and requisite safety provisions.
• Appointment letters: Legally mandatory for every single employee.
• Free health check-ups: Employees above a specific age are entitled to free annual check-ups.

Part II: Income Tax Act, 2025 — What Changed in Your Tax Life

Opportunities to Gain

1. HRA Exemption — Four New Metro Cities
Bengaluru, Hyderabad, Pune, and Ahmedabad now qualify as Metro Cities. Residents are entitled to a 50% of salary HRA exemption cap (up from 40%). Available only under the Old Tax Regime.

2. Children’s Education Allowance — A 30x Leap

3. Meal Allowance / Food Perquisite — 4x Increase

4. Gift and Voucher Exemption: Annual aggregate tax-free limit tripled from ₹5,000 to ₹15,000.

5. Accommodation Perquisite: Lower valuation rates for company housing (Metro rates dropped from 15% to 10%).

6. Medical Loan from Employer: Limit for interest-free medical loans jumped from ₹20,000 to ₹2,00,000.

7. Standard Deduction: Increased to ₹75,000 under the New Tax Regime (remains ₹50,000 in Old Regime).

Areas of Possible Loss

1. Car Perquisite — Higher Taxable Value
The monthly value added to your taxable income for company cars has increased significantly:

• Up to 1,600 cc: ₹5,000/month (was ₹1,800)
• Above 1,600 cc: ₹7,000/month (was ₹2,400)
• Chauffeur: +₹3,000/month (was ₹900)

2. Regime Restriction: Expanded limits for HRA, Education, and Hostel allowances are NOT available under the New Tax Regime.

📋 New Forms — Old Forms Are Invalid

Part III: What Should You Do Right Now?

• Review your investment declaration: Submit Form 124 (not 12BB) for Tax Year 2026–27.
• Compare tax regimes: Run a comparison between both regimes before making your declaration.
• Check your City Status: Bengaluru, Hyderabad, Pune, or Ahmedabad residents should update HRA claims to 50%.
• Ask HR about Restructuring: Ensure your wages constitute at least 50% of your CTC as per the Code on Wages.
• Track Form 130: Download your TDS certificate from the TRACES portal by 15th June 2027.