Income Tax Rules Revised: New ₹4 Lakh & ₹8 Lakh Thresholds for Employee Perks

The government has recently revised the income tax rules, bringing much-needed relief to salaried taxpayers. Two key thresholds have been significantly increased—one for classification of “specified employees” in relation to non-monetary perks, and the other for exemption on overseas medical treatment provided by employers. Let’s break down what these changes mean for you.

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1. Higher Limit for Tax-Free Non-Monetary Perks

Earlier, employees earning more than ₹50,000 in salary could be classified as “specified employees,” making many employer-provided benefits taxable. This limit has now been raised to ₹4,00,000 per year.

What does this mean?

If your annual salary is ₹4 lakh or below, you will not be treated as a “specified employee.” As a result, certain non-monetary perquisites will not attract tax in your hands.

Examples of such perks include:

• Company-provided car with driver
• Household help paid for by the employer
• Educational facilities provided to children
• Utility bills covered by the company
• Transport facilities for daily commute

This revision ensures that lower and middle-income employees can enjoy these benefits without worrying about additional tax liability.

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2. Overseas Medical Treatment Limit Increased to ₹8 Lakh

The second big change relates to medical expenses borne by an employer for treatment abroad. Until now, only employees with a gross total income of up to ₹2 lakh could claim exemption. This threshold has now been raised to ₹8 lakh.

Key points to note:

• The exemption covers treatment, travel, and stay expenses (subject to RBI approvals).
• The benefit can also extend to an attendant accompanying the patient.
• Employees with gross total income up to ₹8 lakh can now avail this exemption.

This change widens the relief net considerably, especially for families where overseas treatment is a necessity but the tax burden previously made it harder to manage.

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3. Who Still Needs to Pay Tax on Perks?

Not every employee qualifies for these exemptions. Some cases where perquisites remain taxable include:

• Company directors, irrespective of salary.
• Employees with substantial ownership interest (20% or more voting power in the company).
• Benefits such as stock options, free or concessional loans, club memberships, expensive gifts, and foreign travel reimbursements, which continue to be fully taxable.

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4. Why This Change Matters

These revisions are part of the government’s push to modernize tax rules and bring them in line with current salary structures. The old limits had become outdated and were catching many low and middle-income employees in unnecessary taxation nets.

Now, with a ₹4 lakh threshold for non-monetary perks and an ₹8 lakh limit for overseas medical perquisites, more salaried individuals will enjoy meaningful tax relief.

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5. Quick Summary

Benefit Type	Old Limit	New Limit	Who Gets Relief?
Non-monetary perquisites (car, utilities, domestic help, etc.)	₹50,000 salary	₹4,00,000 salary	Employees with annual salary ≤ ₹4 lakh
Overseas medical treatment expenses	₹2,00,000 gross income	₹8,00,000 gross income	Employees with gross total income ≤ ₹8 lakh

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Final Thoughts

For salaried taxpayers, these revisions are a welcome step that reduce tax burdens and provide better access to genuine employer-sponsored benefits. As always, proper documentation and accurate reporting in your income tax return will be essential to claim these exemptions smoothly.

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💼 Real-Life Salary Examples: Before vs After the New Tax Rules

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Example 1: Employee with ₹3.6 Lakh Annual Salary (₹30,000/month)

This employee earns below the new ₹4 lakh threshold.

Before the Change (Old Rules)

• Basic Salary: ₹3,60,000
• Perquisites (car + utilities covered by employer): ₹50,000
• Total Taxable Income: ₹4,10,000 (Salary + Perks)

👉 Since the old “specified employee” limit was only ₹50,000, the employee had to pay tax on all perks, pushing taxable income above exemption limits.

Tax Payable (New Regime rates FY 2025–26): ~₹7,500

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After the Change (New Rules)

• Basic Salary: ₹3,60,000
• Perquisites (car + utilities): ₹50,000
• Taxable Perquisites: Nil (Salary ≤ ₹4,00,000, hence not a specified employee)
• Total Taxable Income: ₹3,60,000

Tax Payable: Nil

✅ Savings due to new rules: ~₹7,500 (tax completely eliminated on perks).

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Example 2: Employee with ₹7.5 Lakh Annual Salary + Employer-Sponsored Medical Treatment Abroad

This employee earns below the new ₹8 lakh threshold for medical perks.

Before the Change (Old Rules)

• Gross Salary: ₹7,50,000
• Employer-paid Overseas Medical Expenses: ₹3,00,000
• Old Exemption Limit: Only employees with income ≤ ₹2 lakh could claim exemption.
• Result: Full ₹3,00,000 added to taxable income.

Total Taxable Income: ₹10,50,000
Tax Payable (New Regime): ~₹78,000

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After the Change (New Rules)

• Gross Salary: ₹7,50,000
• Employer-paid Overseas Medical Expenses: ₹3,00,000
• New Exemption Limit: Employees with income ≤ ₹8 lakh qualify for exemption.
• Result: Medical perks fully exempt.

Total Taxable Income: ₹7,50,000
Tax Payable (New Regime): ~₹39,000

✅ Savings due to new rules: ~₹39,000

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📊 Quick Comparison

Scenario	Old Rules (Taxable Income)	Tax Payable	New Rules (Taxable Income)	Tax Payable	Savings
₹3.6 L salary + ₹50k perks	₹4.1 L	₹7,500	₹3.6 L	Nil	₹7,500
₹7.5 L salary + ₹3 L medical	₹10.5 L	₹78,000	₹7.5 L	₹39,000	₹39,000

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✅ Key Takeaway

• Employees with salary up to ₹4 lakh now get a big relief from taxation of non-monetary perks.
• Employees with gross income up to ₹8 lakh can now enjoy tax-free employer-sponsored overseas medical treatment.
• These changes put more money back in the pockets of middle-income earners and simplify compliance.

Disclaimer: This article is for educational purposes only. Taxpayers should consult a qualified tax professional or financial advisor for personalized guidance before making financial or tax-related decisions.

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