The Central Board of Direct Taxes (CBDT) has released draft Income Tax Rules, 2026, proposing five significant changes in the taxation of employee perquisites, aimed at simplifying compliance, improving valuation transparency, and reducing tax disputes.

Key Highlights

• CBDT proposes major tax reforms to simplify employee perquisite valuation and improve payroll compliance nationwide.
• Draft rules introduce clarity in housing, car benefits, loans, meals, gifts, and stock-based compensation taxation.

One of the key proposals relates to the valuation of rent-free or concessional accommodation provided by employers. The revised framework links taxable value more closely to salary slabs and city classifications, ensuring fair and uniform assessment across metropolitan and non-metropolitan areas.

The draft also introduces clearer norms for the taxation of employer-provided vehicles. Separate valuation methods have been proposed for vehicles used exclusively for official purposes, partly for personal use, and entirely for private use. This move is expected to reduce ambiguity and ensure consistent tax treatment.

Another major change concerns the tax treatment of concessional or interest-free loans offered by employers. The revised rules seek to rationalise how the interest benefit is calculated, aligning taxation with prevailing market rates and improving fairness in valuation.

The draft further updates tax rules for employer-provided benefits such as free meals, travel allowances, and gift vouchers. These perquisites will now be valued based on actual cost or predefined thresholds, preventing misuse and improving reporting accuracy.

Additionally, the valuation of employer-issued electronic devices and assets, including laptops, mobile phones, and digital tools, has been revised, acknowledging their growing role in remote and hybrid working environments.

Also Read: Income Earned This Year to Be Assessed Under Old Tax Rules

The draft also includes updated guidelines for stock-based compensation and fringe benefits, aiming to ensure transparency, consistency, and easier compliance for both employers and employees.

Once implemented, these reforms are expected to simplify payroll taxation, enhance clarity, reduce litigation, and improve tax administration efficiency. The government has invited public feedback before finalising the rules, with implementation planned for the next financial year.