Basic Salary vs CTC Under the New Labour Code
By Varun M
CTC (Cost to Company) is your full package; Basic salary is just one piece of it — and under the new labour code, that piece must be at least 50% of the whole. But the same Basic percentage plays out very differently depending on your CTC band. Here's the pattern across three CTC levels, all at the same 25% Basic ratio.
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The short answer
CTC is your total package: Basic, DA, HRA, allowances, employer PF, and other benefits combined. Basic salary is the fixed core component many other figures are calculated from. The new labour code doesn't change what CTC means — it sets a floor under Basic + DA relative to CTC (at least 50%), which affects your PF and gratuity calculations differently depending on how large your CTC is to begin with.
The same ratio, three different outcomes
Here's Basic + DA at a constant 25% of CTC, compared across three CTC bands:
| Annual CTC | Wages before → after | PF before → after | Take-home change |
|---|---|---|---|
| ₹6,00,000 | ₹12,500 → ₹25,000 | ₹1,500 → ₹1,800 | −₹600/month |
| ₹15,00,000 | ₹31,250 → ₹62,500 | ₹1,800 → ₹1,800 | No change |
| ₹25,00,000 | ₹52,083 → ₹1,04,167 | ₹1,800 → ₹1,800 | No change |
Only the ₹6L band sees an actual PF and take-home change — because 25% of that CTC (₹12,500/month) is below the ₹15,000 ceiling, so raising it to the 50% floor (₹25,000) pushes it past that line for the first time. At ₹15L and ₹25L, 25% of CTC is already above ₹15,000, so PF was capped before the rule and stays capped after — only the wage and gratuity figures move.
Why this matters for how you read "your" numbers
If you've seen someone say "the new labour code didn't change my take-home at all," and someone else say "mine went down" — both can be true. It depends entirely on where their wages sat relative to the ₹15,000 ceiling before the rule, which depends on both their CTC and their Basic ratio. See the exact mechanics in the new wage code PF impact and how take-home changes under the new labour code.
What this means for employers
Because the effect varies so much by CTC band, a blanket assumption ("this won't cost us anything" or "this will raise our PF bill across the board") is usually wrong. See how employers must restructure salary for the compliance checklist.
FAQ
CTC (Cost to Company) is your total annual package — Basic, DA, HRA, allowances, employer PF, and any other benefits combined. Basic salary is just one component of that: a fixed core amount, usually the base your other allowances and deductions are calculated from.
Because the ₹15,000/month PF ceiling is a fixed rupee amount, not a percentage. At a low CTC, 25% Basic can fall below ₹15,000, so raising it to the 50% floor pushes PF up. At a higher CTC, 25% Basic is already well above ₹15,000, so PF was capped either way and doesn't move.
It usually means higher PF and gratuity (both good for long-term savings) but slightly lower immediate take-home, since more of your pay goes into statutory deductions rather than your monthly bank account. Which is "better" depends on whether you value take-home now or savings later.
Not anymore, within limits — the new labour code's 50% wage rule sets a floor: Basic + DA + retaining allowance must be at least 50% of total remuneration, regardless of how the rest of the package is labelled.
Yes, directly — gratuity is calculated on your wages (Basic + DA), and unlike PF, there's no ceiling on the gratuity calculation. A higher wage figure always means a higher gratuity base, at every CTC level.
Last verified: 11 Aug 2026
Sources: Code on Wages, 2019; EPF & MP Act 1952 / EPFO (PF wage ceiling); Ministry of Labour & Employment FAQ (Mar 2026).
This is an indicative estimate based on the New Labour Code's wage rules as understood at the time of writing. It does not model income tax, the EPS/EPF split, or company-specific pay structures, and the final Central Rules implementing these provisions were not yet notified as of this verification date. Confirm your exact figures with your employer's payroll team or a qualified professional before relying on this for financial decisions.