Now more employees are eligible for tax free perquisite for any expenditure incurred by the employer for travel outside India on the medical treatment of an employee or any member of the employee’s family

Big change in this tax free perquisite of a salaried employee in Budget 2025

Budget 2025 has increased the limits for being qualified for tax free perquisite for salaried. Now more employees (depending upon the increase in limit of gross total income to be notified) are eligible for tax-free perquisite for any expenditure incurred by the employer for travel outside India on the medical treatment of an employee or any member of the employee’s family.

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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.”

The Income Tax Department has released new frequently asked questions (FAQ) which explain how the increase in limit on the income of employees for the purpose of calculating taxable perquisites apply.

Amendments in tax free perquisite value for employees

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.

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

FAQs about tax free perquisite for employees’ or their family’s medical treatment abroad

According to the Income Tax Department website, here are the FAQs:

Q1 What are the present provisions that are being amended under secƟon 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 secƟon 17 by the Finance Bill 2025?

Answer: 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.

Q.3 For the amendment proposed in section 17(2)(iii), will the limit on salary apply to all employees?

Answer: 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 the employee, will this be a perquisite?

Answer: No, the expenditure on medical treatment and stay abroad for any employee, subject to the extent permiƩed 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

What did the Budget Explanatory Memorandum say about tax free 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 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. This upper limit on income was determined by the Finance Act 2001.

Further, the proviso to clause (2) of section 17 provides that any expenditure incurred by the employer for travel outside India on the medical treatment of an employee or any member of the employee’s family shall not be included in ‘perquisite’, subject to the condition that the gross total income of such employee does not exceed two lakh rupees. This upper limit on income was determined by the Finance Act, 1993.

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.”

This story originally appeared on: India Times - Author:Faqs of Insurances