Central Board of Direct Taxes (CBDT) has amended the Income-tax Rules, 1962 by introducing Rules 3C and 3D, prescribing new income thresholds for claiming exemptions on certain employer-provided perquisites under Section 17(2) of the Income-tax Act. Rule 3C fixes the salary income limit at ₹4,00,000 for the purposes of item (c) of sub-clause (iii) of Section 17(2). This means that employees with salary income exceeding ₹4 lakh in a financial year will not be able to claim exemption on specified perquisites such as meal coupons, rent-free accommodation, or medical reimbursements, which will become fully taxable. Rule 3D sets the gross total income threshold at ₹8,00,000 for exemptions available under clause (vi) of the proviso to Section 17(2), covering benefits such as concessional loans. Accordingly, if an employee’s gross total income exceeds ₹8 lakh, the tax benefit of such concessional facilities will not be available, and the perquisite value will be taxed. These amendments are intended to target exemptions at middle-income salaried employees while limiting tax-free perquisite benefits for higher-income groups. Practical illustrations provided in the notification highlight how commonly offered facilities like meal coupons, rent-free housing, medical check-ups, or low-interest loans will be treated depending on the employee’s income level. The rules, notified through G.S.R. 555(E) dated 18 August 2025, take effect immediately upon publication in the Official Gazette.
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
Notification No. 133/2025-Income Tax |Dated: 18th August, 2025.
G.S.R. 555(E).– In exercise of the powers conferred by clause (2) of section 17 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following rules further to amend the Income-tax Rules,1962, namely:-
1. (1) These rules may be called the Income tax (Twenty Second Amendment) Rules, 2025.
(2) They shall come into force on the date of their publication in Official Gazette.
2. In the Income-tax Rules, 1962, after rule 3B, the following rules shall be inserted, namely:-
“3C. Salary income for the purposes of item (c) of sub-clause (iii) of clause (2) of section 17 of the Act.-
For the purposes of item (c) of sub-clause (iii) of clause (2) of section 17 of the Act, the prescribed income under the head “Salaries” shall be four lakh rupees.
3D. Gross total income for the purposes of clause (vi) of Proviso to clause (2) of section 17 of the Act.-
For the purposes of clause (vi) of Proviso to clause (2) of section 17 of the Act, the prescribed gross total income shall be eight lakh rupees.”
[Notification No. 133/2025/F. No. 370142/27/2025-TPL]
KRITIKA JAIN, Under Secy. (Tax Policy and Legislation)
Note: The Income-tax Rules,1962 were published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii), vide number S.O. 969 (E) dated the 26 March, 1962 and was last amended vide notification number G.S.R. 553(E), dated the 14th August, 2025.
