India’s labour law landscape has undergone its most profound transformation in decades with the implementation of the four new Labour Codes, effective from 21 November 2025. This historic move rationalizes 29 existing labour statutes into a streamlined and modern framework. The aim is to simplify and streamline regulations, enhance workers’ welfare, align the labour ecosystem with global standards, and lay the foundation for a future-ready workforce, boosting employment and driving reforms for Aatmanirbhar Bharat.

The key provisions include universal minimum wages, standardized working conditions, broadened social security coverage, and simplified industrial dispute procedures.

The Four Pillars of Reform

The government has brought into force the key provisions of four consolidated codes:

1. Code on Wages, 2019: Focuses on wages, bonus, and equal remuneration.

2. Industrial Relations Code, 2020: Deals with trade unions, standing orders, and dispute resolution.

3. Code on Social Security, 2020: Expands coverage for benefits like PF, ESI, Gratuity, and includes gig workers.

4. Occupational Safety, Health & Working Conditions (OSHWC) Code, 2020: Covers safety, health, and welfare, including rules for working hours and women’s employment.

The new framework introduces several themes designed to unify compliance across all establishments:

Theme	Summary of Change
Unified Definition of “Wages”	Wages comprise basic pay, dearness allowance, and retaining allowance minus specified exclusions. Exclusions are capped, meaning at least 50% of the employee’s Cost-to-Company (CTC) must be counted as wages for calculating benefits like PF, gratuity, and overtime.
Single Registration & Return	Establishments register once on the Shram Suvidha portal and file a consolidated return instead of multiple returns under different laws.
Inspector-cum-Facilitator	Traditional inspectors are re-designated as “facilitators” who advise employers on compliance. They conduct risk-based digital inspections and still hold powers to issue notices and inspect records.
Decriminalisation & Compounding	Many procedural offences have been decriminalized. First-time minor procedural offences can often be compounded by paying 50% of the maximum fine, promoting compliance over punitive action.
Digital Compliance	Employers are permitted to maintain registers and submit forms electronically, primarily through the Shram Suvidha portal.

Key Features of the Four Labour Codes:

The following table summarizes the core mandates and applicability thresholds for the four codes:

Code	Core Provisions and Features	Applicability Highlights
Code on Wages, 2019	National Floor Wage: Central government notifies a floor wage that states cannot set minimum wages below. Wages must be reviewed at least every five years. Equal Remuneration: Enforces equal pay for equal work irrespective of gender or transgender status. Overtime: Must be paid at double the ordinary wage for work beyond 8 hours/day or 48 hours/week. Final Settlement (FnF): Requires settlement of all wages and dues (including salary and leave encashment) within two working days of dismissal, retrenchment, removal, or voluntary resignation.	Applies to all employees in organized and unorganized sectors, covering factories, shops, IT/ITES, and gig workers.
Industrial Relations Code, 2020	Standing Orders: Mandatory for employers with 300 or more workers (covering service rules like classification, hours, and misconduct). Lay-off/Closure: Establishments with 300+ workers require prior government permission for lay-off (15 days notice), retrenchment (60 days notice), or closure (90 days notice). Grievance Redressal Committee (GRC): Mandatory for establishments with 20+ workers, requiring equal worker and management representation, including at least one woman representative. Dispute Resolution: Accelerated process through two-member tribunals; parties can approach directly if conciliation fails within 90 days.	Applicability threshold for certain provisions (like standing orders) is 300 workers. Extends the definition of “worker” to include sales promotion staff and supervisory employees earning up to about ₹18,000/month.
Code on Social Security, 2020	Gig & Platform Workers: Recognizes these workers; aggregators must contribute 1–2% of annual turnover (capped at 5% of payments to workers) to a social security fund. Gratuity: Fixed-term employees become eligible for gratuity after one year of service. Maternity Benefit: Retains 26-week paid leave and mandates crèche facilities for establishments with 50 or more employees. EPF & ESIC: Coverage is extended Pan-India and made voluntary for establishments with fewer than 10 employees, but mandatory for hazardous industries regardless of size.	Applies to all establishments, employees, and workers, including unorganised, gig, and platform workers.
OSHWC Code, 2020	Working Hours: Normal working day limited to eight hours. Employment of Women: Removes blanket prohibitions; women may work night shifts and in all types of establishments, including mines, with their consent and subject to safety conditions like safe transport and security. Health & Welfare: Mandatory annual health check-ups for workers aged over 40. Safety Committees: Mandatory in establishments employing 500 or more workers.	Covers factories (with revised thresholds: 20 workers w/ power or 40 w/o power), mines, plantations, contract labour, and migrant workers.

The reforms are designed to extend protections to vulnerable and non-traditional employment sectors:

Worker Category	New Benefit/Protection under the Codes
All Workers	Mandatory appointment letters to ensure transparency, job security, and formal employment. Statutory right to minimum wage and timely payment.
Gig & Platform Workers	Mandatory social security coverage and defined contribution model from aggregators. Aadhaar-linked Universal Account Number (UAN) for portable benefits.
Fixed-Term Employees (FTE)	Eligible for all benefits (leave, medical, social security) equal to permanent workers. Gratuity eligibility after only one year of continuous service.
Women Workers	Permitted to work night shifts and in all types of work (including underground mining) subject to consent and safety measures. Explicit prohibition of gender discrimination and guarantee of equal pay for equal work.
Inter-State Migrant Workers	Defined to cover self-migrated workers; receive annual travel allowance, portability of ration and social security benefits, and access to a toll-free helpline.

Practical Obligations for Employers:

The implementation of the Codes places greater responsibilities on employers, particularly concerning payroll and HR procedures. Employers must revise their operations to ensure compliance:

• Review Wage Structure: Salary components must be reworked to ensure that at least 50% of CTC is classified as “wages” to avoid penalties related to PF/bonus liability misclassification.

• Establish FnF Workflow: Companies should adopt a strict T+2 working day internal standard for full-and-final settlement upon an employee’s exit (resignation, termination, etc.).

• Update Registration: Register on the Shram Suvidha portal (Form II) to obtain a single Labour Identification Number (LIN).

• Maintain Records: Issue wage slips (Form V) and maintain statutory registers electronically, including those for fines (Form I), deductions (Form IV), employee details (Form VI), and attendance/wages/overtime (Form VII).

• Safety Compliance: Conduct periodic safety audits, provide free annual medical check-ups for workers over 40, and supply Personal Protective Equipment (PPE) and training.

Failure to Comply: particularly regarding non-payment of minimum wages or delayed remittance of contributions (PF/ESI), can lead to serious penalties, including fines up to ₹50,000 for first offences or imprisonment for repeat violations or serious negligence causing death.

The four labour codes represent a paradigm shift aimed at fostering a fair, safe, and productive work environment by simplifying the fragmented laws and expanding the social safety net.

Q&A: New Labour Codes

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1. What are the New Labour Codes?

The Government of India has consolidated 29 existing labour laws into four major Labour Codes:

1. Code on Wages, 2019
2. Industrial Relations Code, 2020
3. Occupational Safety, Health and Working Conditions (OSH) Code, 2020
4. Social Security Code, 2020

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2. When will the new labour codes come into effect?

The codes are scheduled to be implemented from 21 November 2025 across India.

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3. Why were labour laws consolidated?

To:

• Simplify compliance
• Improve ease of doing business
• Provide uniform definitions
• Protect workers with updated standards
• Enable digital and transparent systems

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4. Who will be covered under the new labour codes?

The Codes apply to:

• All establishments
• All employees (skilled, unskilled, managerial, operational)
• Contract labour
• Gig and platform workers (under Social Security Code)
• Inter-state migrant workers

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5. What is the biggest reform introduced under the Code on Wages?

A universal definition of wages that applies across all labour laws—affecting PF, gratuity, leave encashment, and salary structuring.

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6. What is the new definition of “Wages”?

“Wages” include basic pay + DA + retaining allowance, capped at a minimum of 50% of total CTC.
Allowances cannot exceed 50%.
If allowances exceed 50%, the excess will be added back into “wages”.

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7. How will this affect take-home salary?

Likely impact:

• Higher PF contributions → lower take-home
• Higher long-term retirement benefits (PF, gratuity)

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8. Will gratuity rules change?

Yes. Gratuity will now apply to:

• Fixed-term employees
• Contract workers
• Daily wage workers
• Those who complete one year of service (not necessarily five years) under certain categories

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9. How do the codes impact working hours?

The OSH Code allows:

• Flexible working hours
• 48 hours a week ceiling stays
• Companies may adopt 4-day workweek (12 hours/day cap)

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10. What are the new rules for overtime?

Overtime must be paid at twice the normal wage rate and recorded digitally.
Companies must provide clear records and consent for overtime.

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11. Are there new provisions for women employees?

Yes. The Codes allow:

• Women to work night shifts with consent
• Mandatory safety and transportation arrangements
• Equal opportunity in all job roles

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12. What is new for contract labour?

• Increased digital registration and licensing
• Mandatory employee welfare and safety provisions
• Clarity on contractor vs. principal employer responsibilities

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13. How will gig and platform workers benefit?

The Social Security Code introduces:

• Health insurance
• Accident benefits
• Maternity benefits
• Govt + aggregator (platform) contributions to a Social Security Fund

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14. What happens to PF and ESI coverage?

PF, ESI, EDLI and other social security schemes will be digitised and universalised.
Single registration and unified electronic compliance will apply.

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15. How do the Codes affect retrenchment and layoffs?

Under the Industrial Relations Code:

• Factories with up to 300 employees can hire/lay off without prior govt approval (increased threshold from 100).
• Clearer rules on notice pay, compensation, and worker re-skilling fund.

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16. What is the “Reskilling Fund”?

Employers must deposit 15 days’ wages for every retrenched worker, which will be transferred directly to the worker’s bank account.

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17. What are the compliance requirements for employers?

Employers must ensure:

• Digital maintenance of registers
• Mandatory appointment letters to all workers
• Workplace safety standards (OSH Code)
• Timely payment of wages
• Grievance redressal committees

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18. What is the impact on startups and SMEs?

Positive impact:

• Simplified hiring
• Reduced compliance cost
• Ease of termination for smaller units
• Greater workforce flexibility
  Some cost increase due to PF/gratuity calculation changes.

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19. How will salary restructuring change post-implementation?

Companies will need to revise CTC structures to:

• Ensure minimum 50% component as wages
• Rework allowances
• Adjust PF, gratuity, bonus, and leave encashment calculations

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20. What should companies do before 21 November 2025?

Recommended steps:

1. Conduct a wage structure impact assessment
2. Revisit payroll software
3. Update employment contracts
4. Modify HR policies and standing orders
5. Train HR teams
6. Educate employees on expected changes
7. Ensure compliance with digital registers and filings

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21. Do employees need to take any action?

Mostly no.
Employees should only:

• Review revised salary structures
• Understand higher retirement benefit impacts
• Update KYC for PF/ESI digital systems

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22. Will the four labour codes replace all existing laws?

They replace or merge 29 major laws, but some sector-specific state rules may continue where applicable.

Introduction

Salaried individuals who engage in stock trading or Futures & Options (F&O) transactions often have queries about income tax return filing, applicability for maintaining Books of Accounts and the applicability of tax audit on F&O transactions. This guide provides an in-depth analysis based on the latest provisions under the Income Tax Act, 1961.

Understanding Trading Transactions for Taxation

Trading in stocks or F&O can be broadly classified into two categories:

1. Speculative Business Transactions
2. Non-Speculative Transactions (F&O Trading)

1. Speculative Transactions:

As per Section 43(5) of the Income Tax Act, a speculative transaction is one where the purchase and sale of stocks or commodities are settled without actual delivery. Intraday trading in equities falls under this category. 

2. Non-Speculative Transactions (F&O Trading):

F&O trading, including commodity derivatives on recognized stock exchanges, is treated as non-speculative business income even though no physical delivery takes place.

 Applicability of Tax Audit for F&O Trading

Since F&O trading is considered business income, tax audit provisions under Section 44AB apply similarly to any other business income. Understanding the turnover limits and profit declaration rules is crucial for compliance.

When is Tax Audit Mandatory?

Tax audit under Section 44AB is applicable in the following cases:

1. Turnover up to Rs. 1 crore:
   • Tax audit is not required, regardless of profit or loss, provided Section 44AD(4) does not apply.
2. Turnover exceeding Rs. 1 crore but up to Rs. 10 crore:
   • Tax audit is not required if at least 95% of transactions are digital.
   • Tax audit is mandatory if cash transactions exceed 5% of total receipts or 5% of total payments. 

Please Note Receipts and payments are calculated separately, not cumulatively.

3. Turnover above Rs. 10 crore:
   • Tax audit is mandatory, irrespective of profit or loss.
4. Presumptive Taxation (Section 44AD) and Tax Audit:
   • If a taxpayer opts for Section 44AD, no tax audit is required for turnover up to Rs. 3 crore from Financial Year 2023-24 (Assessment Year 2024-25).
   • However, if Section 44AD(4) applies, tax audit is required if the declared profit is less than 6% (digital) or 8% (cash) of turnover, and total income exceeds the basic exemption limit.

Tax Audit for Professionals Under Section 44ADA and F&O Traders

If a taxpayer is carrying on a profession eligible for presumptive taxation under Section 44ADA and simultaneously engaged in F&O trading, the tax audit requirement is determined separately for each activity:

• For F&O trading, tax audit is applicable as per Section 44AB turnover limits discussed above.
• For professionals under Section 44ADA, tax audit is applicable if gross receipts exceed Rs. 75 lakh from Financial Year 2023-24 (Assessment Year 2024-25).
• If both activities are carried out simultaneously, each must be evaluated independently for tax audit applicability.

How to Calculate Turnover for F&O Trading?

Determining turnover for tax audit purposes is essential for accurate reporting. The method of turnover calculation varies based on the type of transaction:

1. Futures and Options (F&O) Trading: Turnover is calculated as the sum of absolute values of profits and losses from each squared-off trade during the financial year.
2. Options Trading: If an options contract is physically settled, the premium received on the sale is included in turnover computation.

Turnover Calculation as per ICAI Guidance Note: The calculation of turnover for tax audit purposes is guided by ICAI’s Guidance Note on Tax Audit. This method ensures uniformity in turnover computation and compliance with audit requirements.

Understanding the 5% Cash Transaction Clause Under Section 44AB

For businesses with turnover between Rs. 1 crore and Rs. 10 crore, tax audit is not required if cash receipts and cash payments do not exceed 5% of total transactions. This is computed separately as follows:

• Aggregate of all cash receipts, including sales, should not exceed 5% of total receipts.
• Aggregate of all cash payments, including expenses, should not exceed 5% of total payments.

If either of these conditions is violated, tax audit becomes mandatory.

Examples for Clarity

Example 1: Turnover Calculation for F&O Trading

• A trader has the following transactions:
  • Profit from Trade 1: Rs. 1,50,000
  • Loss from Trade 2: Rs. 75,000
  • Profit from Trade 3: Rs. 50,000
  • Loss from Trade 4: Rs. 1,25,000
  • Total absolute turnover = 1,50,000 + 75,000 + 50,000 + 1,25,000 = Rs. 4,00,000
• Since turnover is below Rs. 1 crore, no tax audit is required unless Section 44AD(4) applies. 

When is Books of Accounts Mandatory to maintain?

The Income Tax Act has specified the books of accounts that are required to be maintained for the purpose of Income Tax. These have been prescribed under section 44AA and Rule 6F.

In case business/profession is being carried out by the individual or HUF the limits are increased as under: 

a. For Income – Limit is Rs. 2,50,000

b. For Turnover/Gross Receipt – Limit is Rs. 25,00,000

Tax Benefits on Losses in F&O Transactions

Losses incurred in Futures & Options (F&O) transactions can be set off against rental or interest income. Any unadjusted losses can be carried forward for up to eight years and offset against future business profits, including profits from F&O transactions.

Is Declaring F&O Loss in the Income Tax Return is Mandatory

Many taxpayers, particularly salaried individuals engaged in F&O trading, often fail to report these transactions in their income tax returns. This omission may occur due to ignorance, but it is crucial to note that reporting all sources of income is a legal requirement.

Brokers are mandated to report all security transaction details to the Income Tax Department by filing a Statement of Financial Transactions (SFT) annually. Non-disclosure of F&O transactions can attract scrutiny from the department, resulting in notices for non-compliance and potential penalties for failure to maintain books of accounts and non-filing of the required tax audit report along with the income tax return.

Notice Under Section 139(9) of the Income Tax Act (Defective Return)

Failure to furnish a Balance Sheet and Profit & Loss Account when required can lead to receiving a notice under Section 139(9) from the Centralized Processing Centre (CPC) of the Income Tax Department. The notice typically states:

“The assessee has claimed loss under the head ‘Profits and Gains of Business or Profession’; however, a Balance Sheet and Profit & Loss Account must be provided. If the assessee falls under Section 44AD/44AE/44ADA, the books of account must be audited if the income offered is below the prescribed limits as per the provisions of the Income Tax Act.”

While an audit is not mandatory if the turnover is below INR 1 crore, the income tax return must be duly filed with a complete Balance Sheet and Profit & Loss Account under Section 139 of the Income Tax Act.

Table in Glance:

Scenarios	Opted for 44AD	Declaring Profit	Remarks
1	Yes (Turnover is less than Rs. 2Cr.)	According to 44AD	Neither require to maintain books of accounts nor audit.
2	Yes (Turnover is less than Rs. 2Cr.)	Less than 8% or 6% as the case may be or declaring loss.	Require to maintain books of accounts and audit.
3	No (Turnover is less than limit given u/s 44AB)	Profit or loss whatever is the case.	No audit, maintain books of accounts if limit of 44AA is crossed.
4	No (Turnover is more than limit given u/s 44AB)	Profit or loss whatever is the case.	Audit and maintaining books of accounts is mandatory.

Note: In all the cases of loss audit is not mandatory. It depends case to case. But in general practice and to deal with future litigation this practice followed.

For the latest update on F&O Turnover definition read DEFINITION IN TURNOVER WITH DIFFERENT LAWS – Consult CA Online

Disclaimer: This article is solely for educational purpose and cannot be construed as legal and professional opinion. It is based on the interpretation of the author and are not binding on any tax authority. Author is not responsible for any loss occurred to any person acting or refraining from acting as a result of any material in this article.

📘 What is a Gilt Fund?

A Gilt Fund is a type of debt mutual fund that primarily invests in government securities (G-secs). These are bonds issued by the central and/or state governments to borrow money. As such, gilt funds carry zero credit risk, since they are backed by sovereign guarantee, but they are sensitive to interest rate movements.

Key Features of Gilt Funds:

Feature	Description
Underlying Securities	Government bonds (short to long-term maturity)
Risk Level	Low credit risk, but high interest rate risk
Return Expectation	Moderate returns, typically 5–7% p.a. over medium to long term
Investment Horizon	Ideal for 3–5 years or more
Liquidity	High, as most gilt funds are open-ended
Regulation	Regulated by SEBI

🔹 What is a Gilt Fund Account?

A Gilt Fund Account is a folio or investment account through which an investor can:

• Invest in one or more gilt funds

• Monitor NAV, holdings, and returns

• Redeem or switch between debt schemes

It may be referred to as a Mutual Fund Account with exposure specifically to Gilt Funds. Some platforms also offer direct gilt investments via RBI Retail Direct Gilt Account, allowing investors to buy G-Secs directly from RBI.

RBI Retail Direct’:

As part of continuing efforts to increase retail participation in government securities, ‘the RBI Retail Direct’ facility was announced in the Statement of Developmental and Regulatory Policies dated February 05, 2021 for improving ease of access by retail investors through online access to the government securities market – both primary and secondary – along with the facility to open their gilt securities account (‘Retail Direct’) with the RBI.

In pursuance of this announcement, the ‘RBI Retail Direct’ scheme, which is a one-stop solution to facilitate investment in Government Securities by individual investors is being issued today. The highlights of the ‘RBI Retail Direct’ scheme are:

i. Retail investors (individuals) will have the facility to open and maintain the ‘Retail Direct Gilt Account’ (RDG Account) with RBI.

ii. RDG Account can be opened through an ‘Online portal’ provided for the purpose of the scheme.

iii. The ‘Online portal’ will also give the registered users the following facilities:

1. Access to primary issuance of Government securities
2. Access to NDS-OM.

🔄 Gilt Funds vs Share Market – A Comparison

Particulars	Gilt Funds	Share Market (Equity Investment)
Nature of Investment	Government bonds (debt instruments)	Equity shares of listed companies
Risk Level	Low credit risk, high interest rate risk	High market, business & volatility risk
Returns	Moderate & stable (linked to interest rates)	Potentially high but volatile
Ideal for	Conservative or debt-oriented investors	Growth-seeking and risk-tolerant investors
Investment Horizon	Medium to long-term	Long-term (ideally >5 years)
Volatility	Low to moderate	High
Regulation	SEBI, RBI	SEBI, Stock Exchanges
Liquidity	High in open-ended funds	High for listed shares
Taxation (LTCG >2Y)	12.5% with indexation (for funds held >2 years)	12.5% LTCG on gains > ₹1.25 lakh

📈 Who Should Invest in Gilt Funds?

• Investors looking for safety of capital with moderate returns
• Suitable during falling interest rate cycles (bond prices rise)
• Ideal for diversification in low-risk portfolios

⚠️ Risks to Consider

• Interest Rate Risk: As rates rise, bond prices fall, affecting NAV.
• No Credit Risk, but duration risk is higher in long-term gilt funds.
• Not ideal for short-term parking due to volatility from rate changes.

📑 Source References:

1. SEBI – Mutual Funds Regulations: https://www.sebi.gov.in

2. RBI Retail Direct Scheme: https://rbiretaildirect.org.in

3. AMFI – Gilt Fund Details: https://www.amfiindia.com/investor-corner/knowledge-center/types-of-mutual-funds

Disclaimer: This article is solely for educational purpose and cannot be construed as legal and professional opinion. It is based on the interpretation of the author and are not binding on any tax authority. Author is not responsible for any loss occurred to any person acting or refraining from acting as a result of any material in this article.

Form 15CB – Applicability, Documents Required & Non-Compliance

Particular	Details	Relevant Section/Rule
Applicability
Remitter	Resident making payment to a non-resident	Sec. 195
Taxability	Remittance chargeable to tax under the Income-tax Act	Sec. 5, Sec. 9, Sec. 195
TDS Requirement	Tax deductible at appropriate rate	Sec. 195, Sec. 90(2)
Rule 37BB Exemptions	Not required for 33 specified transactions	Rule 37BB(3)
Filing of Form 15CA	Part C to be filed if tax deductible and supported by Form 15CB	Rule 37BB(2)
Documents Required
Invoice/Agreement	To identify nature and amount of remittance	Sec. 195
TRC (Tax Residency Certificate)	Claim DTAA benefit	Sec. 90(4), Rule 21AB
PAN of Remitter	Mandatory for remitter identification	Sec. 139A
Beneficiary & Bank Details	Required to link parties and trace remittance	Rule 37BB(2)
Form 10F & No PE Declaration	Proof of tax residency and no fixed base in India	Sec. 90(5), Rule 21AB(1)
Bank Advice/Remittance Proof	Supporting documentation for correctness	Rule 37BB
TDS Working/CA Computation	For CA to certify correct rate of deduction	Sec. 195(6), Form 15CB
Consequences of Non-Compliance
Not obtaining Form 15CB	Bank may deny remittance; violation of tax/FEMA obligations	Sec. 195 r/w Rule 37BB
Incorrect Certification	CA liable for ₹10,000 penalty per incorrect report	Sec. 271J
Non-deduction of TDS	Interest @1%/1.5% per month, disallowance of expense, penalties	Sec. 201(1A), Sec. 40(a)(i)
Non-filing of 15CA/15CB	Penalty ranging from ₹10,000 to ₹1,00,000	Sec. 271H

Statutory Sources:

• Income-tax Act, 1961

• CBDT Notification No. 93/2015

• Rule 37BB – Income-tax Rules, 1962