Big change in travel and medical tax free perquisite in Budget 2025: Details here

Union Budget 2025

As per Union Budget 2025, now more employees are eligible for tax-free perquisite for any expense incurred by the employer for travel outside India on the medical treatment of an employee or any member of the employee’s family.

Perquisites are fringe benefits that are received over and above an employee's salary

The most common tax-free perquisites include – travel allowance, medical and recreational facilities, laptop or desktop provided by the company, and interest-free salary loans.

The Finance Minister said it is proposed that the provisions of section 17 may be amended so that the power to prescribe rules may be obtained to increase the limit on the gross total income of the employees so that,-

(I) the amenities and benefits received by such employees would be exempt from being treated as perquisites.

(II) the expenditure incurred by the employer for travel outside India on the medical treatment of such employee or his family member would not be treated as a perquisite.

The existing provisions of clause (2) of section 17 provide, inter-alia, that ‘perquisite’ includes the value of any benefit or amenity granted or provided free of cost or at a concessional rate by any employer (including a company) to an employee whose income under the head "Salaries" as a monetary benefit does not exceed fifty thousand rupees.

An explanatory memorandum to Budget 2025 said, “These limits on the income of the employees for the purpose of calculating perquisites were put in place more than 20 and 30 years ago respectively. Thus, there is a need to adjust these limits accordingly to take into account changes in standard of living and economic conditions.”

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These amendments will take effect from April 1, 2026 and will accordingly apply in relation to the assessment year 2026-27 and subsequent assessment years.

As per the Income Tax Department website, overall, 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 a 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.