India's payroll software vendors had two compliance deadlines to build for in June 2026, and they had nothing to do with each other. On May 8, the Ministry of Labour and Employment notified the final Central Rules under all four Labour Codes, the wage, social security, industrial relations and occupational safety codes that had been stuck in draft form for years (KPMG, 2026). Five weeks later, on June 15, every employer in the country had to issue Form 16 to staff under a completely separate law, the old Income-tax Rules, 1962, that the new Income-tax Act, 2025 is set to replace for the following tax year (India Briefing, 2026). Neither deadline was new news by itself. Together, they show what payroll technology in India is actually being asked to do right now: run two legal systems in parallel while one of them is mid-replacement.
The wage rule everyone is citing, and getting slightly wrong
The Labour Codes have been technically in force since November 21, 2025, but the Central Rules notified in May 2026 are what actually operationalize them, covering minimum wage calculation, annual health check-ups, crèche facilities and appointment letters (KPMG, 2026). The headline compliance point for HR software vendors is the so-called "50% rule": basic pay, dearness allowance and any retaining allowance must together make up at least half of an employee's total cost to company, up from the 30 to 40% many Indian employers, especially in IT and BFSI, have used for years to keep the base for provident fund and gratuity contributions low (Mondaq, 2026).
A legal analysis published by employment specialists at Mondaq notes the rule is often described more strictly than the statute reads: the actual test asks whether excluded components like HRA, conveyance and special allowances exceed 50% of pay, not whether basic pay itself hits an exact 50% figure. The practical effect is close to the same either way. Employers running allowance-heavy CTC structures have to restructure salaries, and every rupee shifted into the wage base raises PF and gratuity liability mechanically (Mondaq, 2026). For payroll systems, that means the wage engine's definition of "wages" had to change, not just a tax table.
A separate, unrelated deadline landed the same month
Form 16, the annual TDS certificate every salaried employee needs to file an income tax return, was due to employees by June 15 for the 2025-26 financial year, under Rule 31(3) of the Income-tax Rules, 1962 (India Briefing, 2026). Employers could not generate the certificate through the TRACES portal until all four quarterly TDS returns for the year were filed, with the fourth due May 31, giving payroll and finance teams a two-week window to close out and issue certificates before a Rs 100-per-day penalty per certificate kicked in under Section 272A(2)(g) of the Income-tax Act (India Briefing, 2026).
What makes the timing notable is that this is very likely one of the last cycles run entirely under the old rules. The Income-tax Act, 2025 introduces new TDS certificate forms, numbered 130 and 131, but those apply only from Tax Year 2026-27 onward, not to the income already earned in the year just closed (India Briefing, 2026). Payroll and HCM platforms operating in India this June had to issue certificates under a legal framework that is already scheduled for retirement, while simultaneously rebuilding wage calculations for a labour law framework that only just went live. Two different ministries, two different timelines, one payroll run.
Vendors are absorbing both at once
Global payroll providers are treating this as a single compliance workload rather than two separate ones. ADP's own guidance to employers frames the Labour Codes changes as requiring a full review of salary structures, PF and gratuity obligations before the new wage base takes hold (ADP, 2026). That advisory sits alongside the routine, recurring TDS and Form 16 cycle that Indian payroll has run every June for over a decade. Neither task is glamorous. Both are exactly the kind of deadline where a compliance rules engine that lags a notification by even a few weeks turns into either a penalty or an underfunded PF account.
What to watch next
State governments still have to notify their own rules under the four Labour Codes before enforcement is uniform nationwide, several states had not done so as of the May notification (KPMG, 2026). The next concrete marker is whether major states issue their versions before the current financial year closes, since state-level gaps are what determine whether the wage rule is enforceable in practice, not just on paper, for employers operating across multiple states.
Sources: India – Government of India Notifies Final Rules on Four Labour Codes — KPMG · India's New Labour Codes And The 50% Wage Rule — Mondaq · Form 16 and Form 16A: June 15, 2026 Issuance Deadline for FY 2025-26 TDS — India Briefing · India's new labour codes: Impact on payroll & compliance — ADP