CBDT notifies two threshold changes in taxation of perquisites for salaried persons: Explained

The Central Board of Direct Taxes (CBDT) has notified twin changes in the Income Tax Rules 1962 to reduce ambiguity around tax calculation for salaried employees receiving certain perks or perquisites from their employers.

Perquisites are non-cash benefits, such as cars, rent-free housing, etc., provided by employers to salaried individuals. Some of these non-cash benefits also form a part of taxable salary.

Through the Income Tax (Twenty Second Amendment) Rules, 2025, the CBDT has inserted two new rules defining specific monetary thresholds, ₹4 lakh for salary income and ₹8 lakh for gross total income, relevant for applying certain provisions of Section 17 of the Income Tax Act, 1961. Here's an explainer on what has changed.

What has changed in taxation of perquisites?

Section 17(2) of the Income Tax Act, 1961, read with Rule 3 of the Income Tax Rules 1962, provides for the valuation of perquisites for calculating taxable income under the head 'Salary'.

Currently, under section 17(2)(iii) of the Income Tax Act, 1961, perquisites include the value of any benefit or amenity granted or provided free of cost or at a concessional rate in any of the following cases:

(a) by a company to an employee who is a director thereof;

(b) by a company to an employee being a person who has a substantial interest in the company;

(c) by any employer (including a company) to an employee to whom the above-mentioned (a) and (b) provisions do not apply and whose income under the head "Salaries" (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds ₹50,000.

The CBDT's latest notification dated August 18, 2025 has introduced two new provisions, Rule 3C and Rule 3D, after the above-mentioned Rule 3B:

The newly inserted rule says, "For the purposes of item (c) of sub-clause (iii) of clause (2) of section 17 of the Act, the prescribed income under the head "Salaries" shall be four lakh rupees." This means that for tax treatment of perquisites, the salary benchmark of ₹4 lakh will apply.

In simple words, the new Rule 3C provides that the prescribed income under the head "Salaries" for the clause (c) above shall be ₹4 lakh.

As per the notification, the ₹8 lakh threshold will be used while calculating the taxability of the specific perquisites under clause vi of Proviso to clause (2) of Section 17 of the Income Tax Act, 1961, which is about "the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee."

The new rules have come into force from the date of their e date of their publication in the Official Gazette on August 18, 2025.