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The 2025 General Budget offers income tax exemption up to Rs 12 lakh and increases the limit for tax-free perquisites, including medical treatment abroad. New rules start April 2026.
Perquisites are additional benefits offered in a job, supplementary to the salary. (Representative/Shutterstock)
In the General Budget 2025, alongside income tax exemption, the government has also announced an increase in the limit for tax-free perquisites. This includes, notably, expenditure incurred on medical treatment abroad. In this context, let us delve into what tax-free perquisites are.
What Are Perquisites
Perquisites are additional benefits offered in a job, supplementary to the salary. These can include travel allowances, company cars, and other such amenities. Some perquisites are eligible for tax exemptions, while others are taxable. Any perquisite not specifically designated as tax-free is considered part of an employee’s income and is subject to taxation accordingly.
What Is The Present Rule
Currently, if an employee’s salary is below Rs 50,000 per annum, additional benefits provided by their employer are not regarded as taxable perquisites.
If the annual salary is less than Rs 2 lakh, company expenditure on medical treatment abroad is considered tax-free. However, the government intends to establish a new limit for tax-free perquisites in the upcoming budget, thereby removing the existing Rs 50,000 per annum threshold.
Furthermore, if the company covers the cost of medical treatment abroad, a new limit will be determined, separate from the income limit of up to Rs 2 lakh.
Implementation Of The New System
New regulations concerning perquisites will be implemented from April 1, 2026, effective from the assessment year 2026-27. However, these exemptions will not apply to directors and shareholding employees, who will continue to be subject to the existing perquisite rules.
The central government has provided significant relief to the salaried and middle classes by exempting income up to Rs 12 lakh from taxation. Additionally, salaried individuals will have no tax liability on income up to Rs 12,75,000.
