Article · 6 min read

Labour codes 2025: how the 50% wage rule resets salaries, tax and retirement savings

Basudha Das, Business Today · businesstoday.in Free Beginner India

A plain explainer of the Labour Codes' single definition of wages: basic pay, dearness allowance and retaining allowance must make up at least half of total pay, which raises the base on which PF and gratuity are worked out.

  • Wages (basic, DA, retaining allowance) must be at least 50% of CTC.
  • Allowances above the other half are counted back into wages.
  • A larger wage base raises gratuity and PF and can lower take-home pay.
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The question it answers

  1. How is gratuity calculated in India, and when must an employer pay it?

Read with it

  1. The Ministry of Labour's 21 November 2025 release bringing the four Labour Codes into force, with the before-and-after table:... pib.gov.in Article Government Makes the Four Labour Codes Effective Press Information Bureau
  2. A free calculator with the formula, worked examples and the rules: (last drawn salary x 15 x years) / 26 for employers covered... cleartax.in Tool · Calculator Gratuity Calculator: formula, rules and examples ClearTax
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