Good News! Tax-Free Perquisite Limits for Salaried Employees Substantially Increased

Good News! Tax-Free Perquisite Limits for Salaried Employees Substantially Increased

The Central Board of Direct Taxes (CBDT) recently issued an official notification dated August 18, 2025, informing of an increase in income threshold limits for calculating tax-free perquisites (perks) in salary income. These new revised limits were updated in the Finance Act 2025 through this notification. These limits were set to come into effect from April 01, 2025, for the assessment year 2026-27 (financial year 2025-26).

Earlier, the salary income limits for tax-free perquisites for specified employees and overseas medical treatment were Rs 50,000 and Rs 2 lakh, respectively. However, now these limits have been increased to Rs 4 lakh and Rs 8 lakh, respectively.

Not all employees are taxed on these perquisites in the same way. The law defines “specified employees” who are more likely to pay tax on these benefits. Specified employees include company directors, employees who own at least 20% of the company, or employees whose salary exceeds a certain amount.

The government has increased this limit to benefit a large number of salaried employees. Earlier, even salaried employees with lower income were required to pay tax on benefits they got from their employers; now, with the increase in the tax-free perquisites limit, these employees have been exempted from paying tax on such perks. At the same time, limits for overseas medical treatment benefits have also been increased to align with today’s economic conditions.