When I first wrote this article the new rules were still in draft. It is now mid-October 2026. The Income-tax Act, 2025 has been in force since 1 April 2026 and the Income-tax Rules, 2026 were notified in March. That lets me do something I could not do before: check what survived into the final rules and what I described as new when it was not. This update does both. Some of what I listed earlier was a genuine change. Some was already law. Let me separate them.
Where Things Stand
The perquisite valuation rules now sit in Rule 15 of the Income-tax Rules, 2026 which replaces Rule 3 of the old 1962 Rules. The Act itself does not introduce new taxes or change tax rates. What changed is mostly the rupee limits that had been frozen for decades and the way benefits are valued. Tax Year 2026-27 is the first year under these rules so payroll and HR teams are working with them right now.
What Really Changed
Meals. The tax-free limit for free food and non-transferable meal vouchers has gone from ₹50 to ₹200 per meal. It is per meal and not per day. Published guidance also notes that meal vouchers now work in both the old and the new tax regime because the earlier restriction for the new regime was dropped. For employees that is a straightforward gain.
Gifts and vouchers. The annual tax-free limit has risen from ₹5,000 to ₹15,000. Two cautions apply. The test is on the total value for the year. And where the total goes over ₹15,000 the guidance reads the whole amount as taxable and not only the excess. HR should keep a running gift ledger so that festival gifts and long service awards do not cross the line by accident.
Company cars. This is the change that surprises people because it raises tax. The monthly value added to income for an employer provided car has gone from ₹1,800 to ₹5,000 for engines up to 1.6 litres. For larger engines it moved from ₹2,400 to ₹7,000 and the chauffeur element from ₹900 to ₹3,000. Employees who have a car as part of their package should expect a lower take-home unless the structure is revised.
Concessional loans. The threshold below which the interest benefit is ignored has risen from ₹20,000 to ₹2 lakh. Above that the benefit is calculated against the SBI rate and is taxable. Loans for specified medical treatment have their own treatment.
Education and hostel allowances. Children's education allowance has risen to ₹3,000 a month per child from ₹100. The hostel allowance was raised as well so confirm the current figure in the Rules. I covered the effect on families in The Great Tax Reset.
What I Called New but Is Not
In the original version I presented four items as 2026 changes that were already in force before this year. I want to correct them.
The ₹7.5 lakh ceiling on employer contributions to PF and NPS and superannuation combined has applied since FY 2020-21. Excess contributions and the income on them being taxable is also an existing rule and it is not a 2026 development.
Rent-free accommodation valuation by city population at 10 percent and 7.5 percent and 5 percent of salary reflects an amendment made in 2023 and uses 2011 census population bands. The new rules carry it forward. Employer-leased housing valued at the lower of actual rent or 10 percent of salary is likewise a continuation and not a fresh relief for Mumbai or Delhi residents.
The rules on foreign digital businesses based on ₹2 crore of India revenue or 3 lakh Indian users already existed under the old framework and I found nothing suggesting a 2026 change. The 1 percent formula for expenses against exempt income is an existing rule too. Neither is really a payroll matter.
I mention these because accurate information is the only thing that makes a guide like this worth reading. If you acted on any of those four as new you would have lost nothing but you may have spent time planning around something that did not change.
What This Means for Salary Structures
If your CTC leans on perquisites review it. Employees with company cars will see a higher taxable value so look at whether a car allowance or a different structure suits them better. Meal cards and carefully tracked gifts are now more useful than before and the meal benefit helps employees in both regimes. Payroll teams should confirm that their software uses the Rule 15 values for Tax Year 2026-27. The annual salary certificate for this year will be Form 130 and it is first due to employees by 15 June 2027. More on that timeline is in The 2026 Income Tax Revolution and the HR Compliance Calendar 2026: Month Wise Statutory Due Dates Every HR Professional Should Know.
For employees choosing between regimes the comparison still depends on your own numbers. The new regime is the default and meals and gifts help you in both. Old vs New Tax Regime: The Final Answer for Salaried Employees in 2026 walks through the choice.
The Direction of Travel
The overall direction is toward fixed formulas that payroll can audit and that leave less room for argument. That is the real value of the new framework. It should become easier to defend a filing once you have the figures right. In the meantime check every limit against the official rules and not against a summary. The Income Tax India website of the CBDT carries the Rules and the forms.
This update reflects the position as of mid-October 2026 as I understand it from the department's announcements and published guidance. Some figures were checked against secondary sources so verify each one in Rule 15 and consult a tax professional before changing salary structures.
By HR MIT - An HR Professional
Comments