On 18 August 2025, the Central Board of Direct Taxes (CBDT) issued Notification No. 133/2025 [G.S.R. 555(E)], amending the Income Tax Rules, 1962. The amendment introduces two new rules—Rule 3C and Rule 3D—which establish monetary thresholds for salary income and gross total income when determining the tax treatment of certain perquisites (work-related perks). These changes, effective from the date of publication, aim to simplify tax calculations for salaried employees and provide clarity to employers.

What are perquisites?

Perquisites (often shortened to perks) are benefits that employers provide to employees in addition to salary. Examples include company-provided cars, rent-free accommodation, subsidized meals, low-interest loans, and stock options. Section 17(2) of the Income‑tax Act 1961 lists various perquisites and specifies when they become taxable. Traditionally, the value of these benefits is added to your income under the head “Salaries” and taxed accordingly.

Under earlier rules, only “specified employees” (i.e., directors, employees with substantial interest in the company, or any employee whose salary (excluding benefits) exceeded ₹50,000) had to include certain perquisites in their taxable income. This ₹50,000 benchmark was set decades ago and is far below today’s salary levels.

What has changed?

New Rule 3C – Salary income threshold

Rule 3C sets a salary benchmark of ₹4 lakh. It states that for item (c) of Section 17(2)(iii)(which covers perks like free housing, cars, or meal coupons provided to ordinary employees),  perquisite taxation applies only if your annual salary exceeds ₹4 lakh.

In simple terms, if you earn less than ₹4 lakh a year (excluding non‑cash benefits), certain perks may no longer be added to your taxable income.

New Rule 3D – Gross total income threshold

Rule 3D introduces a separate benchmark: ₹8 lakh gross total income. It applies to clause (vi) of the proviso to Section 17(2), which covers the tax treatment of specified securities or sweat equity shares given by an employer at a concessional rate or free of cost. Under the new rule, only employees whose gross total income exceeds ₹8 lakh will have to pay tax on such share‑based benefits. Those below this level are now exempt from this provision.

How will this affect you?

Consider three employees with different salary levels:

Example for stock options and specified securities

The second threshold relates to specified securities or sweat equity shares (often given as employee stock options). Suppose an employee receives company shares at a concessional price and their gross total income is ₹6 lakh. Under the old rule (no threshold), the difference between the fair market value and the concessional price was always taxable as a perquisite. Under Rule 3D, this employee is now exempt because their gross income is below ₹8 lakh. Only those earning more than ₹8 lakh will pay tax on the value of such shares.

The following table illustrates the change:

Why these changes matter

• Relief for lower‑ and middle‑income employees: Many salaried workers earning below ₹4lakh will no longer have to include the value of company‑provided perks in their taxable income. This change recognizes inflation and rising salaries since the ₹50,000 threshold was set.
• Clarity for employers: Previously, the absence of clear income thresholds led to differing interpretations and disputes. The new rules provide uniform benchmarks, reducing uncertainty and potential litigation.
• Encouragement for employee stock plans: By exempting those with gross income up to ₹8lakh, Rule 3D may encourage wider participation in employee stock option plans, making share‑based rewards more attractive to middle‑income workers.

Practical tips

1. Review your salary structure: If your salary is around ₹4lakh, check with your HR or tax advisor whether previously taxable perks—such as meal coupons, rent‑free housing, or subsidized car usage are now exempt under Rule 
2. Understand ESOP tax implications: If you hold employee stock options or receive sweat equity shares, verify your gross total income. If it is below ₹8lakh, you may no longer need to pay tax on the value of the shares under Rule 
3. Keep documentation: Even with higher thresholds, proper documentation (salary slips, perquisite valuation statements, and fair market value reports for shares) remains essential in case of tax queries or audits.

Conclusion

The CBDT’s amendment to the Income‑tax Rules marks a significant modernization of perquisite taxation in India. By raising the salary benchmark from ₹50,000 to ₹4 lakh and introducing an ₹8 lakh gross income threshold for share‑based perks, the government has aligned tax rules with contemporary salary levels and provided clarity for both taxpayers and employers. As a result, millions of salaried employees may see a reduction in taxable income and enjoy a simpler, more transparent tax regime.

Disclaimer: This blog is for general informational purposes and reflects our understanding of the provisions at the time of writing. Please consult a qualified tax professional before making decisions based on this information. We are not responsible for any loss arising from reliance on this article.