Govt Proposes Major Changes in Employee Perquisites Valuation under Draft Income Tax Rules, 2026

The government has proposed major changes in how employee perquisites (benefits given by employers) will be valued for tax purposes under the draft Income Tax Rules, 2026. These changes are aimed at revising existing limits that have remained unchanged for several years and at better reflecting current costs and workplace practices.

Among these changes, one of the major changes is related to the employer-provided motor car perquisite. Initially, small cars were valued at Rs. 1,800 per month plus Rs. 900 for a driver, while larger cars were valued at Rs. 2,400 plus Rs. 900 for a driver under Rule 3 of the Income Tax Act 1961. As per the revisions to the proposed amendment, small cars may now be valued at Rs. 8,000 per month plus Rs. 3,000 for a driver, and large cars may be valued at Rs. 10,000 per month plus Rs. 3,000 for a driver under Rule 15/Rule 46 of the Draft Income Tax Rules, 2026.

Second, another key amendment relates to employer-provided meals. Presently, only Rs. 50 per meal is considered tax-free as per Rule 3 of the Old Income Tax Rules. Under Rule 15 of the draft Income Tax Rules 2026, the government has suggested increasing this tax-free limit to Rs. 200 per meal.

The government is also thinking of increasing the exemption limit for gifts received from employers from Rs. 5,000 per year (as per the old provision of Section 17(2) read with Rule 3) to Rs. 15,000 per year. This proposal has been listed under Draft Perquisite Valuation Rules, 2026.