Income Tax Rules Draft 2026: Rule 15 Sets Clear Valuation Standards for Perquisites
This rule strengthens the integrity of the salary taxation system, ensuring that perquisites are neither undervalued nor overlooked, thereby promoting equity and transparency in India’s tax regime.
The draft income tax rules, 2026, mark an important shift in how employee perks and benefits, commonly referred to as perquisites, are valued for taxation. Rule 15, in particular, consolidates the framework, replacing the earlier fragmented provisions under Rule 3 of the Income Tax Rules, 1962. This rule is very important because it ensures uniformity, fairness, and clarity...
The draft income tax rules, 2026, mark an important shift in how employee perks and benefits, commonly referred to as perquisites, are valued for taxation. Rule 15, in particular, consolidates the framework, replacing the earlier fragmented provisions under Rule 3 of the Income Tax Rules, 1962.
This rule is very important because it ensures uniformity, fairness, and clarity in taxation, preventing ambiguity in how non-monetary benefits are treated under the head "Salaries."
The general principle
Rule 15(1) establishes that the value of perquisites provided directly or indirectly by the employer to the employee or any member of their household shall be computed in accordance with the provisions of this rule. This ensures uniform treatment across employers and employees, regardless of the form of benefit.
Residential Accommodation
Rule 15(2) provides a structured valuation method for accommodation, such as :
1. Government Employees: For employees of the Central or State Government, the value is based on the license fee determined by the government, reduced by the rent actually paid by the employee.
2. Other employers :
| Owned Accommodation | Leased Accommodation |
These values are reduced by the rent paid by the employee.
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3. Hotel Accommodation: Valued at the lower of actual hotel charges or 24% of salary, reduced by rent paid. Temporary accommodation up to 15 days on transfer is exempt.
4. Special Exemptions: Accommodation at mining sites, project sites, dams, or remote areas is exempt if conditions such as a plinth area less than or equal to 1000 sq. ft. and a distance greater than or equal to 8 km from municipal limits are met.
5. Transfer Cases: If an employee retains old accommodation while being allotted new accommodation, only the lower value is taxed for 90 days; thereafter, both are taxed.
6. Furnished Accommodation: Value is increased by 10% per annum of furniture cost or actual hire charges if furniture is rented.
7. Deputation Cases: If government employees are deputed to undertakings, the employer is deemed to be the undertaking, and valuation follows the rules for non‑government employers.
Motor Car Perquisites
Detailed valuation for cars-
1. Employer‑owned or hired cars:
| Official use only | Personal use only | Mixed use |
| No taxable value if records are maintained. | Actual expenses incurred by the employer, including chauffeur and wear‑and‑tear, are reduced by the employee’s contribution. | Fixed monthly values apply:
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2. Employee‑owned cars with employer reimbursement:
| Official use only | Mixed use |
| No taxable value if records are maintained. | Actual reimbursement reduced by a fixed deduction (₹5,000/₹7,000 depending on engine capacity). |
3. Other conveyances: Similar rules apply, with deductions of ₹3,000 for mixed use.
Documentation emphasises that employers must maintain journey details and certify official use to claim exemptions.
Goods, Services, and Utilities
1. Salary paid to sweeper, gardener, watchman, or attendant is taxable, reduced bythe employee’s contribution
2. Gas, electricity, or water supplied is valued at the employer’s cost or payment to an external agency.
3. Education:
- If the employer maintains an institution: cost of similar education in the locality, taxable if more than ₹3,000 per child per month.
- If the employer pays another institution: same valuation principle applies.
4. Transport Benefits: Free or concessional travel in the employer’s conveyance is valued at the public rate, reduced by the employee’s payment.
Other Benefits and Amenities
1. Loans: Interest‑free or concessional loans valued at the SBI lending rate, reduced by the interest actually paid. Exemptions apply for medical treatment loans and loans of not more than ₹2,00,000.
2. Holiday Expenses: Employer‑paid holiday costs are taxable, with exceptions for official tours.
3. Food and Beverages: Taxable unless provided during working hours at the office, via vouchers not more than ₹200 per meal, or in remote areas.
4. Gifts: Taxable if aggregate value exceeds ₹15,000 per year.
5. Credit Card Expenses: Taxable unless incurred wholly for official purposes with proper documentation.
6. Movable Assets: Use valued at 10% of cost per annum; transfer valued at depreciated cost (50% for electronics, 20% for cars, 10% for others).
Definitions
Rule 15(8) provides clarity on key terms:
- "Accommodation" includes houses, hotels, service apartments, ships, etc.
- "Salary" excludes DA unless part of retirement benefits, employer PF contributions, exempt allowances, lump‑sum retirement payments, etc.
- "Remote area" is defined as areas beyond 30 km from municipalities with a population of more than 1 lakh.
- "Opening price" and "closing price" are defined precisely for stock valuation. Etc
By concluding this Rule 15 of the Draft Income‑tax Rules, 2026 is a comprehensive framework that meticulously covers almost every conceivable perquisite—from housing and cars to education, gifts, and stock options. By providing detailed tables, conditions, and definitions, it ensures clarity for both employers and employees.
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