Tata Consultancy Services (TCS) on January 12 reported Rs 2,128 crore as an exception item weighing down on its Q3 profit due to statutory impact of new labour codes implemented in India.
The comes as the IT major reported a 14 percent year-on-year (YoY) fall in consolidated net profit to Rs 10,657 crore for the October-December quarter of the ongoing financial year 2026.
TCS said that it assessed and disclosed the incremental impact of these labour law changes on the basis of legal opinion obtained and the best information available. "The incremental impact costing of gratuity of Rs 1,816 crore and long-term compensated absences of Rs 312 crore primarily arises due to change in wage definition," it added.
India’s new labour codes, consolidated under the Code on Wages, 2019, Industrial Relations Code, 2020, Code on Social Security, 2020 and Occupational Safety, Health and Working Conditions Code, 2020, came into effect on November 21.
The law introduces a uniform definition of wages. In practice, this stops companies from parking large chunks of pay in allowances to keep statutory payouts low. Accordingly, basic pay must comprise at least 50 percent of CTC. Several other changes like no salary delays, overtime pay rules and more were introduced as part of the new laws.
Additionally, the company reported Rs 1,010 crore as an exceptional items arising out of Computer Sciences Corporation's legal claim in US, alleging misappropriation of trade secrets and other confidential information. "The Company, based on consultation with the external lawyers and legal assessment, believes that it has a strong case and would defend its position vigorously and pursue legal remedies to overturn the decision of the Fifth Circuit," TCS said.
Due to its restructuring excersise, which saw mass layoffs being announced last year, TCS reported Rs 253 crore as an exceptional item. "Termination benefits have been provided as per policy devised for this purpose," it said.
The restructuring cost incurred in Q3 FY26 was 77 percent lower than the Rs 1,135 crore reported in the previous quarter (Q2 FY25).
"Our associates are at the heart of our transformation into an AIfirst enterprise. As of this quarter, there are over 217,000 associates with advanced AI skills, directly powering client success at scale. We doubled our intake of fresh graduates with higher order skills, rapidly expanding our next-generation talent pool. The passion and commitment our associates show in mastering next-gen capabilities gives us the confidence to innovate responsibly and deliver sustainable value as AI reshapes the services landscape," said TCS Chief HR Officer Sudeep Kunnumal.
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