On 18th August 2025, the CBDT has released the Notification No. 133/2025 in which there are certain amendments in the section 17(2)(iii)(c) and clause (vi) of proviso to clause (2) of section 17 by introducing Rule 3C and 3D respectively. Let’s analyze the amendment in detail: –
Rule 3C
This rule gives reference to Section 17(2)(iii)(c) which deals with the medical benefits and exemptions for employees below a certain salary threshold. Now, with the insertion of Rule 3C, for the purpose of determining the exemption, the prescribed income under the head “salaries” is now fixed at Rs. 4 Lakhs.
Rule 3D
This rule gives reference to Proviso to Section 17(2)(vi) which deals with perquisites in the form of free food / beverages or vouchers. Now, with the insertion of Rule 3D, for the purpose of determining the exemption, the prescribed employee’s gross total income (before claiming Chapter VIA deductions) does not exceed Rs. 8 Lakhs.
It is pertinent to note that for the purpose of Rule 3C, the word “income under the head salaries” and for Rule 3D, the word “gross total income (before claiming chapter VIA deductions)” have been used respectively.
In nutshell, the amendments can be summarized as under :-
Rule 3C – If salary is less than or equal to Rs. 4,00,000/-, then certain medical perquisites will not be taxed.
Rule 3D – If gross total income (before claiming chapter VIA deductions) is less than or equal to Rs. 8,00,000/-, then meal vouchers and similar perquisites can be exempt.
Let us understand these concepts with the help of some examples: –
Example 1 – Employee Bharat
- Salary Income: ₹3,50,000
- Gross Total Income (GTI): ₹3,80,000
- Perquisites received:
- Employer-paid medical facility: ₹30,000
- Meal vouchers: ₹12,000
Analysis:
- Salary ≤ ₹4,00,000 → Rule 3C applies → Medical facility not taxable.
- GTI ≤ ₹8,00,000 → Rule 3D applies → Meal vouchers not taxable.
Taxable perquisites = Nil
Example 2 – Employee Bharat
Salary Income: ₹5,00,000
- Gross Total Income (GTI): ₹5,40,000
- Perquisites received:
- Employer-paid medical facility: ₹40,000
- Meal vouchers: ₹15,000
Analysis:
- Salary > ₹4,00,000 → Rule 3C does not apply → Medical facility taxable.
- GTI ≤ ₹8,00,000 → Rule 3D applies → Meal vouchers not taxable.
Taxable perquisites = ₹40,000 (medical facility only)
Example 3 – Employee Bharat
- Salary Income: ₹7,00,000
- Gross Total Income (GTI): ₹9,00,000
- Perquisites received:
- Employer-paid medical facility: ₹50,000
- Meal vouchers: ₹18,000
Analysis:
- Salary > ₹4,00,000 → Rule 3C does not apply → Medical facility taxable.
- GTI > ₹8,00,000 → Rule 3D does not apply → Meal vouchers taxable.
Taxable perquisites = ₹50,000 (medical) + ₹18,000 (vouchers) = ₹68,000
To view the Notification, click here
