The Central Board of Direct Taxes (CBDT) has officially notified the Income Tax Rules, 2026, introducing updated frameworks for the valuation of perquisites provided to salaried employees. Effective from April 1, 2026, these rules aim to streamline how non-monetary benefits, ranging from rent-free housing to company-provided cars, are calculated and taxed.
Under the new guidelines, residential accommodation valuation remains tied to city population metrics based on the 2011 census. Employees in major metros with populations exceeding 40 lakhs will see their perquisite value pegged at 10% of their salary, while those in smaller urban areas will benefit from lower rates of 7.5% or 5%.
Significant updates were also made to the valuation of "concessional loans" and "fringe benefits." The rules continue to exempt small loans up to Rs 2 lakh and provide relief for medical treatments of specified diseases. Additionally, the tax-free limit for corporate gifts and vouchers has been established at Rs 15,000 per annum, offering a clear threshold for both employers and taxpayers.
The CBDT has emphasised that these valuations are essential for ensuring that the total compensation, both cash and kind, is accurately reflected in an individual’s taxable income under the "salaries" head.
Key perquisite valuation rules
Residential accommodation
The value depends on whether the accommodation is owned, leased, or provided by the government. For government employees, valuation is based on the license fee determined by the government. In the private sector (owned by employer), for cities with a population over 40 lakhs (2011 census), the value is 10% of the salary. In smaller cities (15–40 lakhs), it is 7.5%, and in other areas, it is 5% of the salary.
In case of leased or rented (private sector) accommodation, the value is the actual lease amount paid by the employer or 10% of the salary, whichever is lower. For furnished accommodation, the value increases by 10% per annum of the original cost of furniture or the actual hire charges if rented.
Motor car usage
Valuation is based on engine cubic capacity and the purpose of use (official, personal, or both).
Engine ≤ 1.6L (or Electric): Generally valued at Rs 5,000 per month (plus Rs 3,000 for a driver).
Engine > 1.6L: Valued at Rs 7,000 per month (plus Rs 3,000 for a driver).
Household services & utilities
Personal attendants: Actual salary paid by the employer for services like sweepers, gardeners, or watchmen, minus any amount recovered from the employee.
Utilities: Value of gas, electricity, or water provided from external agencies is the amount paid to the agency; if provided from the employer’s own resources, it is the manufacturing cost per unit.
Educational facilities
Free or subsidised education is valued at the cost of such education in a similar institution in the same locality. Benefits are generally tax-free if the value per child does not exceed Rs 3,000 per month.
Other fringe benefits
Interest-free/concessional loans: Valued using the interest rate charged by the State Bank of India as of the first day of the relevant tax year. Loans up to Rs 2,00,000 or for specified medical treatments are exempt.
Gifts & vouchers: Taxable if the aggregate value in a tax year exceeds Rs 15,000.
Meals: Free food/beverages are non-taxable during working hours if provided via paid vouchers up to Rs 200 per meal.