India Inc caught between data, tax and labour overhauls
New Delhi | Mumbai: The implementation of the upcoming new I-T Act, new Labour Codes, and the DPDP Act and the underlying grey areas, are causing confusion among employers and could alter the compensation structures in companies besides raising litigation risks, said regulatory and legal experts.
Legal experts are of the view that, unlike most regulatory transitions in India, which typically allow years between legislation and enforcement, the tight deadlines of the new laws have compelled companies to go back to the drawing board to make sure that they are on the right side of the laws. Across sectors, companies are raising concerns around interpretational clarity, transition timelines, documentation requirements, and exposure to financial and reputational risks.
"The changes proposed in the new I-T rules issued a few days back for public consultation on various salary components such as car benefits, children and education allowance etc would require additional analysis and assessments to determine the take-home component of salaries which is on a higher base of wage definition now," said Rahul Garg, managing partner at tax and regulatory consultant Asire Consulting.
Garg said companies also need to assess the impact of potential tax liabilities due to additional amounts getting taxed for car benefits and the cost to the company in the form of additional cost for retirement benefits etc. "All this needs to be done by April 1, 2026. Managing employee expectations in all of this is another uphill task," he added. The new Labour Codes expected companies to be compliant immediately from November 21, while the new Income Tax Act is effective from April 1, 2026.
Sharanya Tripathi, an advocate at Jotwani Associates, said under the income tax changes, queries are around reporting standards, compliance thresholds, and the readiness of internal systems.
"For the Labour Codes, employers are particularly concerned about wage definitions, social security contributions, fixed-term employment provisions, and the impact on overall compensation structures," said Tripathi. "The DPDP Act has generated questions regarding data mapping, consent management, cross-border data transfers, vendor liability, and grievance redressal mechanisms," she added.
Sectors such as manufacturing, fintech, healthcare, ecommerce, and financial services, among others, are seeking support from law firms and compliance companies to devise compliance strategies that ensure system and infrastructure changes are in place to meet legal expectations.
"We are advising companies to avoid knee-jerk restructuring. While the codes are notified, the state-level rules are still to be notified," said Rohit Jain, managing partner of law firm Singhania & Co.
Legal experts are of the view that, unlike most regulatory transitions in India, which typically allow years between legislation and enforcement, the tight deadlines of the new laws have compelled companies to go back to the drawing board to make sure that they are on the right side of the laws. Across sectors, companies are raising concerns around interpretational clarity, transition timelines, documentation requirements, and exposure to financial and reputational risks.
"The changes proposed in the new I-T rules issued a few days back for public consultation on various salary components such as car benefits, children and education allowance etc would require additional analysis and assessments to determine the take-home component of salaries which is on a higher base of wage definition now," said Rahul Garg, managing partner at tax and regulatory consultant Asire Consulting.
Garg said companies also need to assess the impact of potential tax liabilities due to additional amounts getting taxed for car benefits and the cost to the company in the form of additional cost for retirement benefits etc. "All this needs to be done by April 1, 2026. Managing employee expectations in all of this is another uphill task," he added. The new Labour Codes expected companies to be compliant immediately from November 21, while the new Income Tax Act is effective from April 1, 2026.
Sharanya Tripathi, an advocate at Jotwani Associates, said under the income tax changes, queries are around reporting standards, compliance thresholds, and the readiness of internal systems.
"For the Labour Codes, employers are particularly concerned about wage definitions, social security contributions, fixed-term employment provisions, and the impact on overall compensation structures," said Tripathi. "The DPDP Act has generated questions regarding data mapping, consent management, cross-border data transfers, vendor liability, and grievance redressal mechanisms," she added.
Sectors such as manufacturing, fintech, healthcare, ecommerce, and financial services, among others, are seeking support from law firms and compliance companies to devise compliance strategies that ensure system and infrastructure changes are in place to meet legal expectations.
"We are advising companies to avoid knee-jerk restructuring. While the codes are notified, the state-level rules are still to be notified," said Rohit Jain, managing partner of law firm Singhania & Co.
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