Salary, PF, tax forms are changing from April 1—Here’s what employees and employers should know

India’s new financial year has begun with a cluster of regulatory and policy changes that will directly affect how employees are paid, taxed, and reported in company systems.

From revised salary structures under labour codes to a new income tax framework and the rollout of Form 130, the changes signal a shift not just in employee take-home pay but also in how organisations manage payroll and compliance, according to Mint’s reporting.

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SALARY STRUCTURE RESET UNDER LABOUR CODES

At the centre of the changes is a restructuring of salary composition.

Under provisions linked to the new labour codes, employers must now ensure that basic pay accounts for at least 50% of total compensation.

This has a direct consequence: higher contributions to provident fund (PF), since PF is calculated as a percentage of basic wages.

For employees, this means:

• Lower take-home salary in the short term
• Higher retirement savings over time

For employers, the impact is more structural:

• Reworking compensation frameworks
• Adjusting cost-to-company (CTC) calculations
• Ensuring compliance across payroll systems

In sectors with flexible pay structures—especially IT and services—this shift is expected to trigger a broader redesign of salary bands and benefits.

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NEW TAX LAW, BUT LIMITED RATE CHANGES

April 1 also marks the implementation of the Income Tax Act, 2025, replacing the six-decade-old 1961 framework.

The new law aims to simplify the tax system by:

• Removing outdated provisions
• Introducing clearer language
• Renaming “financial year” and “assessment year” as a unified “tax year”

However, contrary to expectations, tax slab rates remain unchanged, meaning there is no immediate shift in tax liability for most salaried individuals.

Instead, the impact lies in:

• Simplified reporting
• Reduced ambiguity in tax terminology
• A more streamlined compliance environment

For HR and finance teams, this means updating systems and employee communication without overhauling tax calculations.

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FORM 130 REPLACES FORM 16

One of the most visible changes for employees is the replacement of Form 16 with Form 130 as the primary tax deduction certificate.

Form 130 will:

• Consolidate income and TDS information
• Be issued by employers (and banks for certain taxpayers)
• Serve as the key document for income tax filing

The shift is designed to simplify documentation, but it also places new responsibility on employers to ensure accurate, timely issuance and alignment with payroll data.

For employees, this changes how tax documents are read and filed, particularly in the first year of transition.

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WIDER FINANCIAL AND WORKPLACE IMPACT

Beyond salary and tax, a range of other changes come into effect with the new financial year.

These include:

• Revised banking charges, such as fees on ATM withdrawals beyond free limits
• Changes in compliance and reporting formats
• Adjustments in allowances and benefits, including HRA rules

Collectively, these shifts are expected to influence:

• Household cash flow
• Employer payroll planning
• HR compliance frameworks

While the reforms aim to simplify taxation and strengthen financial discipline, they also mark a shift towards more structured and transparent compensation frameworks.

For businesses, the challenge will be execution—ensuring compliance without disrupting workforce morale. For employees, the focus will be on understanding the trade-off between short-term pay and long-term financial security.

As the new financial year unfolds, these changes are likely to set the tone for how organisations in India design pay, manage compliance, and engage with their workforce in a more regulated, data-driven environment.