An important relief news related to income tax has come to the fore. The Central Board of Direct Taxes (CBDT) has made important amendments in the Income Tax Rules, 1962 and implemented two new rules – Rule 3C and 3D – for the salaried class.
With this new change, lakhs of employees are going to get tax relief on perquisites. This amendment will be effective from April 1, 2025 and its effect will be seen from the assessment year 2026-27. Let us know who will benefit from this new policy and how much.
What was there earlier, what has changed now?
Till now, if an employee’s annual salary (only cash salary, excluding allowances) was more than ₹50,000, then he had to pay tax on additional facilities received from his employer like – personal car, domestic staff, children’s education, electricity-water etc. But now this limit has been increased to ₹4 lakh.
According to the new rules, these facilities will be tax free (if the salary is less than ₹4 lakh):
- -Watchman, gardener, cook or any other employee athome -Personal car provided by the company
- -Utility bills like electricity-water
- -Children’s school fees or free education
- -Other non-monetary benefits (perks)
- -Now if your annual salary is less than ₹4 lakh, then there will be no tax on the above facilities.
On which employees will the tax be applicable?
According to the definition of CBDT, this tax is applicable only on “Specified Employees”. This means employees:
- – who are directors in the company,
- – who have 20% or more voting rights in the company,
- – whose annual salary is more than ₹ 4 lakh (earlier this limit was ₹ 50,000).
- – After this change, a large number of employees will now be exempted from this tax.
Tax exemption on treatment abroad has also been increased;
not just on salary, but if an employer bears the cost of treatment abroad for his employee or his family, then the tax exemption in that too has been expanded significantly.
Earlier : Expenses up to a maximum of ₹2 lakh were considered tax free
Now : This limit has been increased to ₹8 lakh
i.e. in case of a serious illness, if the company bears the expenses, the employee will not have to pay tax on it.
What will be the benefit to the employees?
New change compared to earlier:
Category Earlier Now
Tax free salary limit (for perks) ₹50,000/year ₹4,00,000/year
Tax free limit for treatment abroad ₹2,00,000 ₹8,00,000
Example:
If an employee’s annual salary is ₹3.95 lakh and he gets facilities like vehicle, children’s fees and domestic help from the company, then now these will not be taxable – whereas earlier such facilities were taxable.
Big relief for small employees
The biggest benefit of this decision will be for those employees whose income is limited but they get some additional facilities from the company. Now they will be able to avail these benefits without paying extra tax.
