Good News for Salaried Taxpayers: Tax-Free Perquisite Limits Raised to ₹4 Lakh and ₹8 Lakh

The Finance Act, 2025, brings major relief to salaried individuals with increased income limits for tax-exempt perquisites. Effective April 1, 2025, employees earning up to ₹4 lakh will not be classified as specified employees, and those with gross total income up to ₹8 lakh can claim exemption on overseas medical expenses.

Higher Tax-Free Thresholds Under Finance Act, 2025

Effective from April 1, 2025 (Assessment Year 2026–27), the Central Board of Direct Taxes (CBDT) has revised the tax-free perk criteria. The limit for identifying specified employees has increased from ₹50,000 to ₹4 lakh. Similarly, medical treatment abroad expenditure exempt from tax has risen from ₹2 lakh to ₹8 lakh. 

This allows more salaried individuals to enjoy benefits like interest-free loans and company-paid overseas medical travel without facing tax on them.

What Changed for Specified Employees?

The definition of a specified employee includes those earning above a prescribed threshold as salary. Previously set at ₹50,000 since 2001, this limit remained unchanged for over 20 years. With the new ₹4 lakh benchmark, employees earning below this amount can access several non-monetary benefits exempted from perquisite taxation, such as company-provided domestic help or education facilities for children.

Updated Rules for Overseas Medical Treatment Tax Exemption

The exemption limit for overseas medical treatment and related travel expenses of employees or their family members has been significantly uplifted. Previously, only employees earning up to ₹2 lakh could claim this benefit. The new ₹8 lakh gross total income limit allows more middle-income workers to receive employer-funded treatment and related travel abroad without tax implications.

Read More: ITR Filing FY25: Is Rent-free Housing, Cab Facility, and Sweat Equity Shares Taxable?

Conditions Applied to Overseas Medical Perks

Eligibility for this exemption requires that the medical treatment is conducted abroad, the travel includes only the patient and one attendant, and expenses must align with RBI norms like the LRS cap of $2,50,000 per annum. Any income above ₹8 lakh will make the employee ineligible for this tax exemption.

Conclusion

The Finance Act, 2025, has responded to long-overdue changes in income tax laws by updating perquisite limits. With increased thresholds of ₹4 lakh for specified employees and ₹8 lakh for overseas medical treatment, a larger section of salaried individuals stands to benefit, reducing their overall tax burden and keeping pace with current economic conditions.

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