While monthly take-home pay may marginally decline, provident fund (PF) contributions and gratuity payouts are likely to rise, leading to a higher retirement corpus over time. Currently, many companies calculate PF contributions only on basic pay, while some also include DA, where applicable—typically a small portion of total compensation. However, a higher basic pay component could have tax implications, particularly for employees opting for the old tax regime. He added that employees’ PF contributions qualify for deduction under Section 80C of the Income-tax Act, 1961 (or Section 123 of the Income-tax Act, 2025). With higher PF contributions—if employees choose to contribute on the revised ‘wages’—they can avail higher tax deductions, subject to the overall limit of Rs1.5 lakh.

Source: Indian Express January 04, 2026 17:39 UTC