The Finance Bill 2025 proposes changes to Section 17 of the Income Tax Act regarding the taxation of employee perquisites. Under current provisions, amenities and benefits, along with employer-paid travel expenses for medical treatment outside India, are taxed as perquisites if the employee’s salary exceeds specified limits. The Bill introduces amendments to raise these limits. For instance, employees earning below a set salary threshold will no longer face perquisite tax on certain benefits. Similarly, the employer’s expenditure for foreign medical travel for employees or their families will also not be treated as a perquisite if the employee’s salary is below a certain limit. However, directors or individuals with a substantial interest in the company will not benefit from these exemptions, as their benefits will still be considered perquisites regardless of their salary. Additionally, medical expenses for treatment abroad will not be taxed as a perquisite, provided they comply with Reserve Bank of India regulations.
Page Contents
- FAQs: Increase in limits on income of employees for the purpose of calculating perquisites – Budget 2025
- Q1 What are the present provisions that are being amended under section 17 by the Finance Bill 2025?
- Q.2 What are the changes proposed in the amendment to section 17 by the Finance Bill 2025?
- Q.3 For the amendment proposed in section 17(2)(iii), will the limit on salary apply to all employees?
- Q.4 If an employer has incurred expenditure for medical treatment and stay abroad of employee, will this be a perquisite?
FAQs: Increase in limits on income of employees for the purpose of calculating perquisites – Budget 2025
Q1 What are the present provisions that are being amended under section 17 by the Finance Bill 2025?
Ans. The present provisions provide for an upper limit on salary beyond which the following will be treated as perquisites and taxed in the hands of the employees
a. the amenities and benefits (in general) received from employers
b. the expenditure incurred by the employer for travel outside India on the medical treatment of an employee or his family member.
Q.2 What are the changes proposed in the amendment to section 17 by the Finance Bill 2025?
Ans. There are 2 changes proposed to specify the limit on salary so that:
a. The amenities and benefits (in general) received by employees with a salary below certain limit would be exempt from being treated as perquisite. The limits, presently at Rs 50,000/- per annum, can now be prescribed by the Central Government.
The expenditure incurred by the employer for travel outside India on the medical treatment of an employee with a salary below a certain limit, or for his family member would not be treated as a perquisite. Such limits, presently at Rs 2,00,000/-per annum, can now be prescribed by the Central Government.
Q.3 For the amendment proposed in section 17(2)(iii), will the limit on salary apply to all employees?
Ans. In case of a director of the company or a person who has a substantial interest in the company, these amenities and benefits will continue to be treated as perquisites irrespective of the salary earned.
Therefore, the limit on salary specified shall only be applicable for an employee who is not a director nor a person who has a substantial interest, in the employer company.
Q.4 If an employer has incurred expenditure for medical treatment and stay abroad of employee, will this be a perquisite?
Ans. No, the expenditure on medical treatment and stay abroad for any employee, subject to the extent permitted by the Reserve Bank of India, will not be treated as a perquisite. It is clarified that the proposed amendment [refer (b) in Q.1] relates to travel outside India on medical treatment of an employee or his family member.
