Rules 17 and 18 of the Draft Income-tax Rules, 2026 deal with salary prescription for specific purposes and exemption of medical benefits from perquisite valuation. Rule 17 prescribes ₹4,00,000 as the income under the head “Salaries” for the purposes of section 17(1)(c)(ii) of the Act. Rule 18 sets out detailed conditions for approval of hospitals to qualify for medical perquisite exemption under section 17(2)(b)(ii). For non-Indian systems of medicine hospitals, the Principal Chief Commissioner or Chief Commissioner must ensure compliance with municipal laws, hygiene standards, infrastructure requirements (including minimum beds, operation theatre, labour room, ICU facilities where applicable), medical equipment, staffing norms for doctors and nurses, proper sterilisation, drinking water, patient isolation facilities, and maintenance of patient records. For hospitals under Indian systems of medicine and homeopathy, approval is subject to conditions laid down in the Office Memorandum dated 6 June 2002. The rule also specifies eligible diseases and ailments such as cancer, tuberculosis, AIDS, major organ-related conditions requiring surgery or hospitalisation, fractures, obstetric procedures, mental disorders, drug addiction, severe burns, and anaphylactic shocks, often requiring minimum continuous hospital stay. Definitions of “qualified doctor,” “nurse,” and “surgical operation” are provided to ensure clarity. Overall, the provisions standardise eligibility and infrastructure norms to regulate medical perquisite exemptions under salary taxation.
Extract of Rule No. 17 and 18 of Draft Income-tax Rules, 2026
Rule 17
Salary income for purposes of section 17(1)(c)(ii) of the Act
For the purposes of section 17(1)(c)(ii), the prescribed income under the head “Salaries” shall be four lakhs’ rupees.
Rule 18
Exemption of medical benefits from perquisite value in respect of medical treatment of prescribed diseases or ailments in hospitals approved by the Chief Commissioner.
(1) In granting approval to any hospital other than a hospital for Indian system of medicine and homeopathic treatment for the purposes of section 17(2)(b)(ii) of the Act, the Principal Chief Commissioner or Chief Commissioner shall satisfy himself that the hospital is registered with the local authority and fulfils the following requirements, namely:—
(a) The building used for the hospital complies with the municipal bye-laws in force.
(b) The rooms are well ventilated, lighted and are kept in clean and hygienic conditions.
(c) At least ten iron spring beds are provided for patients.
(d) At least one properly equipped operation theatre is provided, with minimum floor space of 180 square feet and with a separate sterilisation room.
(e) At least one labour room is provided, with minimum floor space of 180 square feet, in case the hospital provides medical service for maternity cases.
(f) Aseptic conditions are maintained in the operation theatre and the labour room.
(g) A duty room is provided for the nursing staff on duty.
(h) Adequate space for storage of medicines, food articles, equipments, etc., is provided.
(i) The water used in the hospital or nursing home is fit for drinking.
(j) Adequate arrangements are made for isolating septic and infectious patients.
(k) The hospital is provided with and maintains:—
i. high pressure sterilizer and instrument sterilizer;
ii. oxygen cylinders and necessary attachments for giving oxygen;
iii. adequate surgical equipments, instruments and apparatus including intravenous apparatus;
iv. a pathological laboratory for testing of blood, urine and stool;
v. electro-cardiogram monitoring system;
vi. stand-by generator for use in case of power failure.
(l) There is at least one qualified doctor available on duty round the clock for every twenty beds or fraction thereof.
(m) In hospitals providing intensive care unit facilities, there are at least two qualified doctors available on duty round the clock exclusively for such intensive care unit.
(n) One nurse is on duty round the clock for every five beds or a fraction thereof.
(o) In hospitals providing intensive care unit facilities, there are at least four nurses provided exclusively for every four beds or fraction thereof for such intensive care unit.
(p) The hospital maintains record of health of every patient containing information about the patient’s name, address, occupation, sex, age, date of admission, date of discharge, diagnosis of disease and treatment undertaken.
(2) In granting approval to any hospital for Indian system of medicine and homeopathic treatment for the purposes of 17(2)(b)(ii) of the Act, the Principal Chief Commissioner or Chief Commissioner shall satisfy himself that the hospital fulfils the conditions specified in the Office Memorandum dated the 6th June, 2002, issued by the Department of Indian Systems of Medicine and Homeopathy, Ministry of Health and Family Welfare for approval of private hospitals for Indian system of medicine and homeopathic treatment to Central Government Health Scheme beneficiaries and Central Government employees.
(3) For the purpose of section 17(2)(b)(ii) of the Act, the prescribed diseases or ailments shall be the following, namely :—
a. cancer;
b. tuberculosis;
c. acquired immunity deficiency syndrome;
d. disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gall bladder, digestive system, endocrine glands or the skin, requiring surgical operation;
e. ailment or disease of the eye, ear, nose or throat, requiring surgical operation;
f. fracture in any part of the skeletal system or dislocation of vertebrae requiring surgical operation or orthopaedic treatment;
g. gynaecological or obstetric ailment or disease requiring surgical operation, caesarean operation or laparoscopic intervention;
h. ailment or disease of the organs mentioned at (d), requiring medical treatment in a hospital for at least three continuous days;
i. gynaecological or obstetric ailment or disease requiring medical treatment in a hospital for at least three continuous days;
j. burn injuries requiring medical treatment in a hospital for at least three continuous days;
k. mental disorder – neurotic or psychotic – requiring medical treatment in a hospital for at least three continuous days;
l. drug addiction requiring medical treatment in a hospital for at least seven continuous days;
m. anaphylactic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital for at least three continuous days.
(4) For the purpose of this rule,—
(a) “qualified doctor” means a person who holds a degree recognised by the Medical Council of India and is registered by the Medical Council of any State;
(b) “nurse” means a person who holds a certificate of a recognised Nursing Council and is registered under any law for the registration of nurses;
(c) “surgical operation” includes treatment by modern methodology such as angioplasty, dialysis, lithotripsy, laser or cryo-surgery.
