The Ministry of Finance recently introduced the Income-tax (Twenty Second Amendment) Rules, 2025 through Notification G.S.R. 555(E), redefining key thresholds related to perquisites and employer-provided medical benefits. For professionals and salaried employees, this update has significant implications on taxable income and exemptions. Let’s break it down.
Under Section 17 of the Income-tax Act, 1961, the value of certain perquisites benefits or amenities provided by employers is considered part of an employee’s salary income. Historically, thresholds for taxable perquisites and exemptions were relatively low, limiting the scope for middle-income employees to benefit.
The 2025 amendment introduces higher thresholds, clarifying who can enjoy tax exemptions and who will have these benefits included in taxable income.
Who Benefits the Most?
| Employee Type | Previous Threshold | New Threshold | Key Benefit |
|---|---|---|---|
| Non-director, non-shareholder employees | Salary > ₹50,000 | Salary > ₹4,00,000 | More employees exempt from perquisite taxation |
| Employees availing medical/travel abroad | Gross income ≤ ₹2,00,000 | Gross income ≤ ₹8,00,000 | Larger group eligible for tax-free employer-provided medical benefits |
Salary Thresholds for Perquisites (Rule 3C)
Rule 3C now sets the salary income threshold at ₹4 lakh for determining the taxability of perquisites under section 17(2)(iii)(c).
- Who it applies to: Employees who are not directors or substantial shareholders of the company.
- Implication: If an employee’s salary is below ₹4 lakh, certain perquisites may not be taxable, providing relief to a wider set of middle-income professionals.
Before: Only employees earning above ₹50,000 were considered for perquisite taxation.
Now: Threshold is significantly increased to ₹4 lakh, reflecting inflation and modern salary structures.
Gross Total Income Threshold for Medical & Travel Benefits (Rule 3D)
Employer expenses on medical treatment and travel for employees or their family members abroad have always been a sensitive area in tax compliance.
The amendment clarifies:
- Expenditure on medical treatment abroad (employee/family) and
- Travel & stay abroad for treatment (employee/family + one attendant)
is excluded from taxable perquisites if the gross total income of the employee does not exceed ₹8 lakh.
Key conditions:
- Expenditure on medical treatment and stay abroad must follow RBI regulations.
- Travel exclusion applies only if the employee’s gross income ≤ ₹8 lakh (earlier ₹2 lakh).
This change expands eligibility for tax-free medical and travel benefits to a larger pool of employees, especially in the middle-income bracket.
Conclusion
The Income-tax (Twenty Second Amendment) Rules, 2025 reflect the government’s effort to align taxation with contemporary income levels. Middle-income employees are set to gain significantly from higher thresholds, particularly in perquisites and medical reimbursements.
For tax planning and compliance, staying updated with such amendments is essential not only to optimize benefits but also to avoid unnecessary tax liabilities.
At Counselvise, we believe clarity in law empowers professionals to make informed decisions. Keep track of these thresholds and plan your salary structure and perquisites accordingly!
