Revised Income Tax perquisite norms to be applicable to old and new regimes

The revisions proposed in the employee perquisites under the draft Income Tax (I-T) Rules, 2026, will be applicable to both the old and the new tax regimes, providing updated relief and clarity for salaried taxpayers across categories, sources in the Central Board of Direct Taxes said on Monday.

The draft I-T rules propose enhancement of tax-free benefits for employer-provided free meals and official vehicles. The value of free food and non-alcoholic beverages supplied by employers during working hours has been increased substantially.

The perquisite value (taxable portion) is now fixed such that up to Rs 200 per meal remains effectively tax-free, a sharp rise from the previous limit of Rs 50 per meal.

Revised norms for auto-transactions

For employer-provided motor cars, the monthly taxable perquisite values for running and maintenance (including driver allowance) have been revised upward to account for inflation and rising expenses.

For cars with engine capacity not exceeding 1.6 litres, the perquisite is set at Rs 8,000 per month (comprising Rs 5,000 for the car plus Rs 3,000 for the driver), up from the earlier Rs 2,700 (Rs 1,800 plus Rs 900 for the driver).

For cars exceeding 1.6 litres engine capacity, it stands at Rs 10,000 per month (Rs 7,000 plus Rs 3,000 for the driver), previously Rs 3,300 (Rs 2,400 plus Rs 900 for the driver).

A long-overdue update

These revisions mark a long-overdue update, as the old rates had remained largely unchanged for decades despite significant increases in fuel, maintenance, and driver costs. Other notable changes include raising the annual tax-free threshold for gifts received from employers to Rs 15,000, up from Rs 5,000.

Sonu Iyer, Partner and National Leader at EY India, said the enhancement of interest free or concessional loan limit from Rs 20,000 to Rs 2 lakh gives a strong signal to shift towards financial well-being-oriented policies.

The draft I-T rules also include Central Bank Digital Currency (CBDC) as an acceptable mode of electronic payment.

Sandeep Jhunjhunwala, Partner at Nangia Global Advisors, said the inclusion in the draft rules provide a regulatory foundation for operational integration of CBDC into existing financial systems. This step also signals the government’s intent to promote wider public usage of CBDC in the coming years.