Perquisite & Overseas Medical Exemption Become Tax-Free under Rule 3C and 3D for Salaried Employees

A new income tax notification issued on 18th August 2025 by the Ministry of Finance and Department of Revenue which introduces the Income Tax 22nd Amendment Rules.

These amendments inserted two new rules, Rule 3C and Rule 3D, after Rule 3B.

Rule 3C

Rule 3C addresses the exemption limit for non-monetary perquisites provided by an employer to a salaried employee.

Here,

Non-monetary perquisites include-

• Company car 
• Domestic help (such as services of a sweeper, gardener, watchman, personal attendance) 
• Supply of gas, electricity or water
• Education facility
• Transport facility or free accommodation.

Limit For This Exemption

Earlier, if salary exceeded ₹50,000, perquisites became taxable. Now, perquisites are exempt if salary is within ₹4 lakh, making many employees eligible for tax relief.

The government has increased the salary income for 17(2)(ii)(c) from ₹50,000 to ₹4 lakh.

For Example

• With the new limit, if your salary is ₹3.8 lakh and perks are ₹1 lakh, the taxable salary remains ₹3.8 lakh, as the ₹1 lakh in perks is exempt.

This benefit is applicable only if the employee's salary is below ₹4 lakh and if it exceeds ₹4 lakh, these perquisites become taxable.

Rule 3D 

Rule 3D pertains to the exemption for expenses incurred on overseas medical treatment.

Covered expenses include medical treatment abroad, travel and stay for self, family, or attendant; if paid by the employer, these are exempt up to the new limit.

Increased Income Limit

For overseas medical treatment, the gross total income limit for 17(2) Proviso Clause (vi) has been raised from ₹2 lakh to ₹8 lakh.

If the gross total income exceeds ₹8 lakh, such medical or travel benefits become taxable.

RBI approval is mandatory for certain overseas treatment and related expenses to claim the exemption.

Overall, these changes provide major relief for salaried employees, especially those receiving non-monetary perks or employer-sponsored overseas medical benefits.