How to Save Maximum Tax under New Perquisite Rules in FY27

What are Tax Perquisites?

Perquisites (perks) are basically non-cash economic benefits or facilities provided by an employer to an employee in addition to salary. Perks are considered part of the employee’s total income and are taxable/exempted under the head ‘Income from Salaries' as per Section 17(2) of the IT Act. Some perks are taxed because they provide economic benefits to the employee, even if no cash is received.

In brief, Taxable Salary Income = Salary + Perks (Taxable/Exempted up to certain limits).

• Taxable Perks: Benefits that have monetary value—added to salary and taxed as per slab rates. 
• Non-Taxable / Exempt Perquisites: Specifically exempted by law or rules and not added to taxable income 

Overview of the New Perquisite Rules in FY 2026-27

The IT Rules, 2026, have introduced several taxpayer-friendly changes that directly impact salary structuring: non-taxable.

• Meal Vouchers/Subsidised Canteen Meals: Applicable for both old & new tax regimes
  • The exemption limit was enhanced to ₹200 per meal from the prior ₹50.
  • This applies to food and non-alcoholic beverages provided during working hours, either on office premises or through non-transferable vouchers usable only at eating joints. 
  • The maximum benefit of around ₹105,600 is available under both tax regimes—new and old (NTR+OTR).
• Non-cash Gifts / Vouchers / Tokens: Applicable for both tax regimes
  • Aggregate exemption increased to ₹15,000 per financial year from the prior ₹5,000 (for both tax regimes).
  • Cash gifts continue to be fully taxable.
• Telephone / Mobile Reimbursement: Applicable for both tax regimes
  • Remains fully exempt when the employer directly bears the expense.
  • Aggregate limit of ₹12000 per FY for both tax regimes.
• Employer NPS Contribution (Section 80CCD(2)): Applicable for both tax regimes
  • Up to 14% of (Basic + Dearness Allowance ─ DA)
• Children’s Education and Hostel Allowances: Applicable for the old regime only ── significantly enhanced under the new IT rules 2026
  • Significantly enhanced to ₹3,000 per month per child for education and ₹9,000 per month per child for hostel (maximum two children), offering a potential annual exemption of up to ₹2.88 lakh.
  • Children’s Education Allowance: Up to ₹3,000 per month per child (increased from the earlier ₹100), for a maximum of two children.
  • Children’s Hostel Expenditure Allowance: Up to ₹9,000 per month per child (increased from ₹300), for a maximum of two children.
  • These exemptions are available only under the old tax regime and are not permitted in the new tax regime.
  • For two children, the combined annual exemption can reach up to ₹2.88 lakh (₹72,000 from the education allowance + ₹2.16 lakh from the hostel allowance), providing meaningful relief for families with educated children and potentially saving ₹80,000+ in tax for those in the 30% bracket (including cess).
  • For College-Going Children: There is no separate enhanced employer allowance for higher education. However, parents can claim the following:
    • Tuition fees under Section 80C (actual fees paid to recognised universities/colleges/schools, up to the overall ₹1.5 lakh limit, for up to two children).
    • Education loan interest under Section 80E (full interest deductible for up to 8 years on loans for higher education of children).
    • Always obtain a certificate from the head of the institution to support the claim for education/hostel allowances. 
    • Employers must include these in the salary structure and reflect them correctly in the new salary statement (Form 130).

Major taxable perquisites under Rule 15 of the Income Tax Act (FY 2026-27) that salaried taxpayers should avoid/explore with caution/proper documentation for tax efficiencies/optimisations:

• Motor Car Perquisite: Applicable for both tax regimes (may be added to the gross salary). -Taxable unless strictly for official use supported by proper documentation
  • Revised valuation for mixed use. 
  • For cars with engine capacity up to 1.6 litres (including EVs), the taxable value is ₹5,000 per month (plus ₹3,000 for a chauffeur) when the employer bears running and maintenance costs; i.e., ₹8,000/PM may be added to taxable income.
  • For larger engines, the value is ₹7,000 per month + ₹3,000 for the chauffeur; i.e., ₹10,000/PM may be added to taxable income.
  • No perquisite is charged if the car is used wholly and exclusively for official purposes with a proper journey logbook and employer certification, etc.
  • Lower values apply if the employee bears the running and maintenance expenses for personal use. 
  • Certain official-use reimbursements may still qualify for exemption and may still provide income tax relief.
  • Employers must update payroll systems to reflect these new valuations and issue the revised salary statement (Form 130, which replaces the earlier Form 16) for the tax year 2025-26 onwards.
  • Note: If the employee is provided a chauffeur-driven car by his employer for both official & personal purposes (mixed), then an average perquisite cost of up to ₹8000-10000/month may be added to his gross salary; if the use of the car is strictly official, supported by proper documentation, the value of such a car perquisite is zero; i.e., no addition to the gross salary of the employee.
• Residential accommodation is often the largest perquisite in value (taxable). Many employers or corporates prefer giving HRA instead of rent-free accommodation in the new tax regime.
• Utilities (gas, electricity, and water) are straightforward — almost always taxable if paid by the employer.
• Interest-free loans can be structured smartly (especially home loans), but they create a taxable perquisite if the interest charged is below market rate.
• Club memberships & credit cards require strong documentation to avoid full taxation. Fully taxable unless used purely for business purposes.
• Movable Assets — Providing laptops, tablets, and mobiles is tax-efficient (nil value), but other movable assets like TVs, ACs, and furniture may attract tax.

Tax deductions/exemptions/benefits (NTR vs OTR): New Tax Regime vs Old Tax Regime

An illustration of tax computation availing all potential rebates, exemptions & deductions: NTR (New Tax Regime)

An illustration of tax computation availing all potential rebates, exemptions & deductions: OTR (Old Tax Regime)

The valuation and exemption rules for perquisites (under Rule 15 and related provisions) generally apply to both regimes (NTR+OTR) because they relate to the computation of Salary" income u/s 17. The main difference is that the OTR additionally allows major Chapter VI-A deductions (80C, 80D, etc.) and specific exemptions like HRA, children's education/hostel allowances, and home loan interest on self-occupied property. In brief, these tax reforms or recalibrations may be a reflection of the government’s intention for a taxpayer-friendly regime ─ maintaining simplicity while optimising overall collection under both tax regimes.

How to take maximum benefits under the New Perquisite Rules for FY27 by focusing primarily on tax-free components and avoiding taxable ones

• NTR-New Tax Regime (Default) – Focus on tax-free perquisites and NPS: Now, the new regime continues to be the default option for most salaried individuals. Emphasis should be placed on maximising available exemptions that include:
  • Negotiate a higher Basic + DA component (ideally 45–50% of CTC) to optimise employer NPS contribution (up to 14%).
  • Fully utilise meal vouchers up to ₹1.05 lakh annually.
  • Incorporate non-cash gifts up to ₹15,000 and telephone reimbursement.
  • Structure company car usage strictly for official purposes to maintain nil perquisite value (add-on).
  • Leverage the standard deduction of ₹75,000 (automatic).

With proper salary restructuring, individuals with gross income up to ₹15–16 lakh can still achieve near-zero tax liability.

• OTR-Old Tax Regime – Ideal for Families and High Deduction Cases: Employees paying rent, having school-going children, or servicing home loans should carefully evaluate the old regime
  • HRA Exemption: Highly effective, especially in the eight major cities qualifying for 50% of the salary benefit.
  • Children’s Education & Hostel Allowances: Up to ₹2.88 lakh per year for two children (primarily for school education).
  • Section 80C + Additional NPS (80CCD(1B)): Combined deduction up to ₹2 lakh.
  • Section 80D: Health insurance premiums.
  • Home Loan Interest: Up to ₹2 lakh for self-occupied property under Section 24(b).

Conclusion

Overall, when combined with all common potential perquisites (meals, gifts, official car), the old regime may deliver better tax optimisation for mid-to-senior-level employees (gross salary above ₹15 LPA), while the new tax regime option may be beneficial for junior-level employees, having gross salary around ₹13-15 LPA. The decision between the new and old tax regimes must now be based on individual circumstances — rent payments, family education costs, home loan liabilities, and investment habits. Thus, blindly following the default new regime may no longer be the most beneficial choice for everyone. But for both regimes, some salary restructuring or recalibration─ maximising non-taxable perks and minimising/zeroing taxable perks may result in significant tax savings for FY27 and beyond.