Notification 133/2025: Big Tax Relief on Perquisites for Salaried Employees

Indian taxes have just become more advantageous for most salaried staff. Central Board of Direct Taxes, (CBDT), released Notification Number 133/2025 on 18 August 2025. In the Income tax Rules of 1962, Rule 3C is introduced by Notification 133/2025. This new rule raises the thresholds for income taxation under section 17(2) Income tax Act of 1961. These changes will take effect on 1 April 2025, which is the Financial Year 2025- 2026/Assessment Year 2026-2027.

What Are Perquisites?

These are other benefits that an employer provides to its employees. Perquisites can be in the form of non monetary facilities, such as those that are free or discounted (e.g. Use of a car, education free for kids, transportation and utilities are all examples. (e.g., travel expenses and hotel stays in connection with a medical treatment abroad) Section 17(2) Income Tax Act allows the taxation of these benefits, unless there are specific exemptions.

Notification No. 133/2025

It prescribes what it is New Threshold which benefits the income under the heading "Salaries", for employees who are specified under section 17(2)(iii), is now Rupee 4,00,000. The gross total of the employee's income must be less than Rupee 8 lakh to qualify for tax free perquisites.

Salary Employees: Implications

1. Reduced Taxes for Low and Middle-Income Earners

With salaries of up to Rupee 4 lakhs, many benefits are now available without taxation. The threshold for taxing benefits was previously very low at Rs. 50,000, which resulted in many people with modest incomes being subjected to perquisite taxes.

2. Exemption limit increased for overseas medical treatment

In the past, if an employee's family was sent overseas for treatment by a doctor, travel & accommodation costs were covered only if their gross annual income did not exceed 2 lakh rupees. The limit is now Rs 8 lakh and many people will be able to benefit.

3. Clarity in tax planning and compliance

In order to comply with the new regulations, employers and payroll departments must update their policies. They will also need to ensure that any perquisites they have are properly valued or exempted. It will also impact TDS and Form 16/ITR reporting.

4. Employees with higher earnings

The tax burden on those who earn above certain thresholds, such as a salary > 4 lakh rupees or a gross income total > 8 lakh rupees, may be higher. Any benefit, such as free medical care, travel abroad, or other benefits, could now increase your income.

Why this Change was Needed

Last updated over a decade ago, the previous thresholds (Rs.50,000 for perquisites taxes on "specified employees", and Rs. 2,00,000 to exempt overseas medical stay/travel) had been lowered. Due to the inflation rate, increasing cost of living and shifting salary standards, many people found these thresholds irrelevant and they were burdened with unnecessary taxes. With this revision, perquisite taxes are more closely aligned with incomes.

How to Takeaway & What you Should Do

• Examine your total gross salary and income. The new rules may allow you to receive a significant benefit if they fall below the Rs. 4 lakh or Rs. 8 lakh thresholds.
• Please check with your employer to see if the perquisites you are receiving or planning will be properly taxed, as per Rules 3C and 3D.
• Make sure you accurately declare all the perquisites when filing ITRs for AYs 2026-27.
• You should still consult with a tax expert if you are just about to cross the threshold. It is possible that there could be legal or structural interpretations which can assist.

Concluding Remark

It is good news that Notification Number 133/2025 has brought relief to many Indian salaried people. In raising thresholds up to Rs.4 lakh for salary and Rs.8 lakh in gross income, the Indian government eased tax burdens on medical expenses and non-cash benefits. For many, the change is a positive one. While those with higher incomes may need to focus more on their tax-deductible expenses, it will be a benefit to them immediately. Updates to payroll and compliance software are now a must for employers. In general, this reform improves the fairness of taxation and updates perquisites' taxation to match today's economy.