The Finance Bill, 2025, proposes several key changes in the Income Tax Act, 1961, to continue reforms in the direct tax system through tax reliefs, removing difficulties faced by taxpayers, and rationalizing1 various provisions. Here are some of the key changes:
Increase in the limits on the income of the employees for the purpose of calculating perquisites
Perquisites: Section 17 of the Income Tax Act defines perquisites as benefits or amenities provided by an employer to an employee. Currently, these benefits are not considered perquisites if the employee’s income from salary does not exceed Rs. 50,000.
Medical treatment: Similarly, employer expenditure on medical treatment outside India is not considered a perquisite if the employee’s gross total income does not exceed Rs. 2 lakhs.
Outdated limits: These limits were set in 2001 and 1993, respectively, and are now outdated.
Proposed amendment: The Bill proposes to amend Section 17 to allow for an increase in these limits through rules.
Effective date: These amendments will take effect from April 1, 2026.
I. Increase in the limits on the income of the employees for the purpose of calculating perquisites
The existing provisions of clause (2) of section 17 provide, inter-alia, that ‘perquisite’ includes the value of any benefit or amenity granted or provided free of cost or at a concessional rate by any employer (including a company) to an employee whose income under the head “Salaries” as a monetary benefit does not exceed fifty thousand rupees. This upper limit on income was determined by the Finance Act 2001.
2. Further, the proviso to clause (2) of section 17 provides that any expenditure incurred by the employer for travel outside India on the medical treatment of an employee or any member of the employee’s family shall not be included in ‘perquisite’, subject to the condition that the gross total income of such employee does not exceed two lakh rupees. This upper limit on income was determined by the Finance Act, 1993.
3. These limits on the income of the employees for the purpose of calculating perquisites were put in place more than 20 and 30 years ago respectively. Thus, there is a need to adjust these limits accordingly to take into account changes in the standard of living and economic conditions.
4. It is proposed that the provisions of section 17 may be amended so that the power to prescribe rules may be obtained to increase the limit on the gross total income of the employees so that,-
(I) the amenities and benefits received by such employees would be exempt from being treated as perquisites.
(II) the expenditure incurred by the employer for travel outside India on the medical treatment of such employee or his family member would not be treated as a perquisite.
5. These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the assessment year 2026-27 and subsequent assessment years.
[Clause 9]