Newsflash — Income-tax Act, 2025: Key Changes Impacting Salary
The Income-tax Act, 2025 is operative from 1 April 2026 and the corresponding Rules (the Income Tax Rules, 2026) replace the 1962 Rules. Rule 15 of the new Rules (the successor to Rule 3) revises perquisite valuations meaningfully. Payroll structures should be reviewed before the first TY 2026-27 payroll closing.
Inside this newsflash:
Motor car perquisite: values revised upward (e.g., INR 5,000/month for cars below 1.6L from INR 1,800; chauffeur INR 3,000 from INR 900).
Gifts and vouchers: exempt threshold raised to INR 15,000 p.a. (from INR 5,000).
Free meal vouchers: INR 200/meal (from INR 50).
Children education and hostel allowances: substantially revised, but only available under the OLD tax regime.
Interest-free or concessional loan for medical treatment: exemption threshold raised to INR 2,00,000 (from INR 20,000).
Other transitional considerations for compensation and payroll teams.