ADVERTORIAL
India India’s Income Tax Rules, 2026, introduce a more structured, disclosure- led framework for the taxation of salaries, allowances and employee benefits, building on the Income-tax Act, 2025. While the core principles of salary taxation remain unchanged, the rules expand reporting depth, valuation clarity and employer accountability. The scope of taxable salary remains broad, covering fixed pay alongside allowances, bonuses, commissions, perquisites and profits in lieu of salary. Any employment- related benefit, whether in cash or kind, is taxable unless specifically exempt. The rules define how these components must be classified, valued, documented and reported. For employers, this represents a shift from routine payroll processing to continuous tax governance. Organisations must ensure accurate classification, maintain exemption
documentation, and apply precise tax deduction- at-source calculations throughout the year. The framework reflects a shift from aggregate reporting to component- level transparency and from estimation-based taxation to rule-based valuation. This is driven by the expanded scope of the 2025 Act, which includes non-cash benefits such as housing, vehicles and equity-linked incentives, as well as indirect payments such as bonuses and termination compensation. As a result, payroll is increasingly a core compliance function rather than an administrative process. Employers with complex or internationally dispersed workforce structures will need to reassess cost-to-company arrangements, ensuring each compensation element is clearly defined, documented and aligned with statutory tax classifications. Guidance is available from Dezan Shira’s India Briefing .
through the national work permit system, reflecting more
centralised enforcement. Revised payroll templates now link compensation thresholds to multiples of regional average urban wages, replacing fixed salary references. Under the updated framework, Category A applicants must meet six times, and Category B applicants four times, the relevant regional average wage. Salary benchmarks will now adjust annually with updated wage data, creating a recurring compliance requirement. In Shanghai, revised thresholds typically take effect from July following publication of wage statistics. As a result, foreign employees applying or renewing permits may face higher minimum salary requirements, particularly in previously more flexible jurisdictions. China Briefing from Dezan Shira & Associates offers further information on the updated enforcement approach.
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ISSUE 23 GLOBAL PAYROLL MAGAZINE
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