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Aug 21, 2025
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Good news for salaried taxpayers: Limits for these two tax-free perquisites raised substantially in Finance Act, 2025
On August 18, 2025, the Central Board of Direct Taxes (CBDT) issued a notification which effectively increased the income threshold limits for calculating tax-free perquisites (perks) in salary income. These new limits were introduced in the Finance Act, 2025, via a notification in the India e-Gazette, and will take effect from April 1, 2025 (AY 2026-27).
Previously, the salary income limit for tax free perquisite were Rs 50,000 for specified employees and Rs 2 lakh for overseas medical treatment. Now, these limits have been significantly raised to Rs 4 lakh for specified employees and Rs 8 lakh for overseas medical treatment, thanks to the insertion of new Rules 3C and 3D into the Income-tax Rules, 1962.
The Rs 4 lakh and Rs 8 lakh mentioned above refers to the threshold limit of salary or gross total income of the employee,which allows certain benefits/amenities to be excluded from perquisite taxation; they do not represent the value of benefit/ amenities themselves.
What is perquisite taxation?
Chartered Accountant Rahul Singh, senior manager, advisory & research, Taxmann explains:
Section 17(2)(iii) [specified employees]
"When an employer provides the following benefits or amenities to its employees, the value of such benefits or amenities is taxable as perquisite only in the hands of specified employees as per Section 17(2)(iii) of the ITA read with Rule 3 of the Income-tax Rules:
Use of a car or any other automotive conveyance [Rule 3(2)]
Services of a sweeper, a gardener, a watchman or a personal attendant [Rule 3(3)]
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