🏢 PERQUISITES – WHAT’S CHANGED IN THE TAX LAW (Act 1961 → Act 2025 & Rules 2026)
What are Perquisites?
Perquisites are non-cash benefits provided by the employer to the employee and are generally taxable under Section 17(2) of the Income-tax Act. These include employer-provided cars, meals, gifts, loans, education benefits and similar amenities.
📜 STATUTORY SHIFT — Income-tax Act 1961 → Income-tax Act, 2025
✔ The Income-tax Act, 2025 replaces the old Income-tax Act, 1961 effective 1 Apr 2026 with an updated framework.
✔ Section 17(2) in Act, 1961 continues to govern perquisites and remains a concept in Section 17 of the new Act.
✔ The new Act retains perquisites as taxable income but modernises definitions and simplifies structure of provisions compared to the 1961 law.
📊 KEY RULE CHANGES — Perquisite Valuation (Rules 1962 → Draft Rules 2026)
The Income-tax Rules 2026 introduce updated perquisite valuation limits, addressing long-pending outdated thresholds in old Rules (1962):
| Perquisite Type | Under Old Rules (1962) | Draft Rules 2026 |
|---|---|---|
| Meal benefits | ₹50 per meal exempt | ₹200 per meal exempt (→ up to ₹1,05,600/yr if 2 meals × 22 days × 12 mo) |
| Gifts (non-cash) | ₹5,000 p.a. | ₹15,000 p.a. |
| Child education allowance | ₹100 /mo per child | ₹3,000 /mo per child |
| Hostel allowance | ₹300 /mo per child | ₹9,000 /mo per child |
| Employer-provided car (basic val.) | ₹1,800 /mo (≤1.6 L) | ₹5,000 /mo (≤1.6 L) + ₹3,000 driver |
| Medical treatment loans (perq) | Rs 20k limit | Rs 2,00,000 counterpart limit exempt {{with conditions}} |
➡ Earlier perquisite ceilings had not been updated for decades; the new proposal aligns benefits with inflation and current cost realities.
📌 ACT VS RULE INTERPLAY
🔹 The Act (2025) continues to define what counts as a perquisite and retains the key taxation rule under Section 17.
🔹 The Rules (2026 draft) shape how perquisites are valued and set monetary exemption limits — these are administrative details tied to the Act.
🎯 IMPACT ON SALARIED TAXPAYERS
✔ Higher exempt thresholds: More perquisite benefits will be tax-free or have a higher exemption limit.
✔ Modernised car perq valuation: Car benefit values updated to reflect actual costs, though overall taxable value for some vehicles may rise relative to old rules.
✔ Meal & education perks more meaningful: Substantial uplift in meal, education and hostel exemptions makes salary structuring more tax-efficient.
📌 KEY TAKEAWAYS
• Income-tax Act, 2025 modernises perquisite provisions without materially altering the concept — perquisites remain taxable income.
• Income-tax Rules 2026 significantly update monetary valuation and exemptions for perks — making several common non-cash benefits more tax-friendly.
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