🏢 PERQUISITES – WHAT’S CHANGED IN THE TAX LAW (Act 1961 → Act 2025 & Rules 2026)

 🏢 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.

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📜 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.

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📊 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The Income-tax Rules 2026 introduce updated perquisite valuation limits, addressing long-pending outdated thresholds in old Rules (1962):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.

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📌 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.

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🎯 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.

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📌 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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🏠 HRA EXEMPTION – WHAT CHANGED FROM 2026 & HOW IT BENEFITS SALARIED TAXPAYERS

 What is HRA?

House Rent Allowance (HRA) is a salary component paid by employers to employees who live in rented accommodation. It helps reduce taxable income under the old tax regime.

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✅ Legal Provision
HRA exemption is governed by Section 10(13A) of the Income-tax Act read with Rule 2A.

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📊 How HRA Exemption is Calculated
The exempt amount is the least of:

• Actual HRA received
• Rent paid minus 10% of salary
• Prescribed % of salary
 – 50% for metro cities
 – 40% for non-metro cities

(Salary = Basic + DA forming part of retirement benefits)

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🔄 Key Change under Income-tax Rules 2026
Additional major cities are now treated on par with metros for HRA purposes.

➡ Earlier: Only Delhi, Mumbai, Chennai, Kolkata qualified for 50% limit
➡ Now added: Bengaluru, Hyderabad, Pune, Ahmedabad

This increases the eligible exemption ceiling for salaried employees residing in these cities.

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⚖ Old vs New Tax Regime
✔ Old regime → HRA exemption available
✖ New regime → HRA exemption not available

Employees must opt for the regime that gives better net tax efficiency.

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💡 How This Helps Taxpayers
• Higher exemption for urban renters
• Reduced taxable salary
• Better take-home pay under the old regime
• Reflects rising urban housing costs

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📌 Bottom Line
If you live in the newly classified cities and claim HRA under the old regime, your exemption potential increases — translating into tangible tax savings.

For salary structuring or tax planning, evaluate regime choice carefully.

📢 Draft Income Tax Rules 2026 — Key Monetary Changes Clients Must Know

 

The Government has released draft Income Tax Rules 2026 aligned with the upcoming Income Tax Act, 2025. These proposals mainly revise PAN reporting limits, crypto compliance, employee benefits, and HRA rules. Here are the important monetary thresholds:

🔹 PAN Mandatory — Proposed Limits

• Cash deposits/withdrawals: PAN required if total cash transactions reach ₹10 lakh in a financial year (earlier ₹50,000 per day rule)
• Motor vehicle purchase: PAN required only if value exceeds ₹5 lakh
• Hotel/event payments: PAN needed if payment exceeds ₹1 lakh (earlier ₹50,000)
• Property transactions: PAN mandatory if value exceeds ₹20 lakh (earlier ₹10 lakh)
• Insurance accounts: PAN required to start any account-based relationship

🔹 Employee Perquisite Limits

• Tax-free meal benefit proposed at ₹200 per meal
• Employer-provided car valuation:
— Up to 1.6L engine: ₹8,000/month
— Above 1.6L engine: ₹10,000/month
(includes driver cost)

🔹 Crypto Reporting

Crypto exchanges may be required to report investor transactions — stronger compliance monitoring expected.

🔹 HRA Metro City Expansion

Bengaluru, Pune, Ahmedabad, and Hyderabad proposed as metro cities — may increase HRA exemption eligibility.

🔹 CBDC Recognition

Central Bank Digital Currency proposed as a valid electronic payment method.

⚠ Note: These are draft rules and may change after consultation. Expected rollout alongside the new law from April 1.

📢 Appointment of Auditor — Casual Vacancy Due to Death

When a statutory auditor passes away during their term, the vacancy is treated as a casual vacancy under Section 139(8) of the Companies Act, 2013.

✅ The Board of Directors is empowered to appoint a new auditor within 30 days
✅ No shareholder approval or EGM is required
✅ The appointed auditor holds office until the next AGM
✅ Form ADT-1 must be filed with ROC after appointment

This provision ensures continuity in statutory audit and protects compliance timelines.

If your company faces such a situation, timely Board action and proper documentation are critical for regulatory compliance.

Need guidance on Board resolutions, filings, or audit compliance? We’re here to help.


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📢 PAN RULE CHANGES — Draft Income-tax Rules, 2026

 

The government has proposed key updates on when PAN must be quoted in financial transactions. The intent is to rationalize thresholds and align reporting with risk-based monitoring.

🔹 Vehicle purchase — PAN needed only above ₹5 lakh
🔹 Hotel/restaurant cash payments — limit increased to ₹1 lakh
🔹 Life insurance premium — reporting shifts to account-relationship basis
🔹 Property transactions — threshold doubled to ₹20 lakh
🔹 Bank/post office cash withdrawals — new reporting trigger at ₹10 lakh

These proposed revisions aim to simplify compliance while improving transparency in high-value transactions.

Businesses and individuals should review transaction structures and documentation processes to stay aligned.

For clarity or compliance planning, consult your tax advisor.

US Revises Trade Deal Factsheet: What It Means for India’s Agriculture Sector

 

A recent development in the India–US trade discussions has drawn attention after the United States quietly revised its official factsheet describing the proposed trade framework. While the change may appear technical, it carries important signals — especially for India’s agriculture sector.

Let’s break this down in simple terms.

What happened?

The US government initially released a document summarising key elements of a proposed trade understanding with India. That document suggested India would reduce tariffs on certain agricultural products, including pulses (like lentils and chickpeas), and would make firm commitments to purchase American agricultural goods.

Soon after criticism and public debate, the US revised the factsheet. The updated version removed references to pulses, softened language around purchase commitments, and dropped claims that India would eliminate digital service taxes.

Why pulses matter

India is the world’s largest producer and consumer of pulses. Millions of Indian farmers depend on this sector for income. Lower tariffs on imported pulses could allow cheaper foreign products to enter the Indian market, potentially affecting domestic farmers.

By removing pulses from the factsheet, the revision suggests that India has not agreed to open this sensitive sector — or at least not in the way originally described.

Change in wording — and why it’s important

The earlier factsheet used strong language like “committed,” implying binding promises. The revised version uses softer wording like “intends,” which signals flexibility and ongoing negotiation.

In trade diplomacy, wording matters. Strong terms can suggest firm obligations, while softer language indicates that discussions are still evolving.

Digital tax clarification

The initial claim that India would remove digital services taxes was also rolled back. This means India retains its policy position while continuing discussions on digital trade rules.

Political and economic context

Trade negotiations often involve balancing domestic economic protection with international cooperation. Agriculture is politically sensitive in India, and any perception of weakening farmer safeguards attracts strong reactions.

The revision does not necessarily mean the deal has changed. Instead, it suggests that public descriptions are being aligned more carefully with what has actually been agreed — or not agreed — at this stage.

What this means going forward

For now, there is no confirmed decision to reduce tariffs on pulses or open India’s agriculture market in a significant way. The revisions indicate:

• India is maintaining a cautious stance on sensitive farm sectors

• Trade discussions remain ongoing

• Public communication is being recalibrated

Final thought

Trade negotiations are dynamic and often involve adjustments in messaging as much as policy. The revised factsheet signals that India continues to prioritise domestic agricultural interests while engaging in broader economic cooperation with the US.

For farmers, businesses, and policymakers, the key takeaway is simple: protections remain in place for now, and negotiations are still unfolding.