CBDT Notifies Income Tax Rules, Salary and Gross Income Thresholds The Central Board of Direct Taxes (CBDT) has issued Notification No. 133/2025, date
CBDT Notifies Income Tax Rules, Salary and Gross Income Thresholds
The Central Board of Direct Taxes (CBDT) has issued Notification No. 133/2025, dated August 18, 2025, introducing the Income Tax (Twenty-Second Amendment) Rules, 2025. The amendment specifies new income thresholds under Section 17 of the Income Tax Act, 1961.
Key highlights of the notification:
In exercise of the powers conferred by clause (2) of section 17 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:
“3C. Salary income for the purposes of item (c) of sub-clause (iii) of clause (2) of section 17 of the Act—
For the purposes of item (c) of sub-clause (iii) of clause (2) of section 17 of the Act, the prescribed income under the head “Salaries” shall be four lakh rupees.
3D. Gross total income for the purposes of clause (vi) of the proviso to clause (2) of section 17 of the Act—
For the purposes of clause (vi) of the proviso to clause (2) of section 17 of the Act, the prescribed gross total income shall be eight lakh rupees.”
Key highlights of the notification:
- A new Rule 3C has been inserted:
- For the purposes of clause (2)(iii)(c) of section 17, the prescribed income under the head “Salaries” shall be ₹4 lakh.
- A new Rule 3D has been inserted:
- For the purposes of clause (2)(vi) of the proviso to section 17, the prescribed gross total income shall be ₹8 lakh.
- The amendment came into force on August 18, 2025, upon publication in the Official Gazette. This means the thresholds will apply for income earned from that date onwards.
In exercise of the powers conferred by clause (2) of section 17 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:
- These rules may be called the Income Tax (Twenty-Second Amendment) Rules, 2025.
- They shall come into force on the date of their publication in the Official Gazette.
“3C. Salary income for the purposes of item (c) of sub-clause (iii) of clause (2) of section 17 of the Act—
For the purposes of item (c) of sub-clause (iii) of clause (2) of section 17 of the Act, the prescribed income under the head “Salaries” shall be four lakh rupees.
3D. Gross total income for the purposes of clause (vi) of the proviso to clause (2) of section 17 of the Act—
For the purposes of clause (vi) of the proviso to clause (2) of section 17 of the Act, the prescribed gross total income shall be eight lakh rupees.”
Effect of Rule 3C
Salaried individuals earning less than ₹4 lakh will not come under the purview of perquisite taxation under this specific provision. Those earning above ₹4 lakh will have to include such perquisites in their taxable income as prescribed.Effect of Rule 3D
Only those with a gross total income exceeding ₹8 lakh will be liable for taxation on such specified securities or sweat equity shares as per the Act.Perquisites
For instance, under Section 17(2)(iii), perquisites include benefits given:
Why Was a Partial Tax Levied
Partial tax is levied because the salary income is more than 4 lakh rupees, whereas the gross total income (GTI) is less than the 8 lakh limit. So, as per the new rule, the limit given in Rule 3C is crossed, so the prerequisites given in Rule 3D, i.e., Section 17(2)(iii)(c), will be taxable. whereas the limit given in Rule 3D is not crossed, so the prerequisites given as per Rule 3D, i.e., 17(2)(vi), will not be taxable.
Thus, Rule 3C is to provide relief to those with low incomes, and Rule 3D is to provide relief to those with middle incomes.
यह नियम 18 अगस्त 2025 से प्रभावी होगा (गजट नोटिफिकेशन जारी होने की तारीख)।
उद्देश्य:
आयकर में मिलने वाली सुविधाओं (जैसे मकान, गाड़ी, क्लब मेंबरशिप आदि) के टैक्स निर्धारण में पारदर्शिता और स्पष्टता लाना और छोटे वेतनधारी कर्मचारियों को राहत देना।
The Notification can be accessed at: https://incometaxindia.gov.in/news/notification-no-133-2025.pdf
- From a company to a director-employee.
- By a company to an employee who holds a substantial interest in the company.
- By any employer to an employee not covered by (1) or (2), provided the employee’s salary income, excluding non-monetary benefits, exceeds ₹50,000.
Practical Implications for Salaried Taxpayers: Employees earning below ₹4 lakh (Salary Head):
- Such individuals are now outside the purview of perquisite taxation under Section 17(2)(iii)(c). For instance, if an employee earning ₹3.5 lakh annually is provided free or concessional benefits like subsidised housing, the value of those benefits may not attract tax under this clause.
-
Employees earning above ₹4 lakh (Salary Head): Those above this threshold will continue to include the value of perquisites in their taxable income, as prescribed. For example, a salaried professional earning ₹7 lakh annually who receives a rent-free company-provided flat will have to include the taxable value of that accommodation in his or her income.
- Employees receiving securities or sweat equity shares: If the gross total income of an employee exceeds ₹8 lakh, and they receive shares or securities from their employer at a concessional rate or free of cost, the value of such allotment will be taxable. Those with a gross total income below ₹8 lakh are exempt from this provision.
| Case Example | (Salary Income) | (GTI) | Rule 3C (₹4 Lacs Limit) | Rule 3D (₹8 Lacs Limit) | Tax position on Perquisites |
|---|---|---|---|---|---|
| A | ₹ 3,90,000 | ₹ 3,90,000 | Not Applicable | Not Applicable | No Tax |
| B | ₹ 5,50,000 | ₹ 7,80,000 | Applicable | Not Applicable | Partial tax levied |
| C | ₹ 9,00,000 | ₹ 12,00,000 | Applicable | Applicable | Tax Levied |
Why Was a Partial Tax Levied
Partial tax is levied because the salary income is more than 4 lakh rupees, whereas the gross total income (GTI) is less than the 8 lakh limit. So, as per the new rule, the limit given in Rule 3C is crossed, so the prerequisites given in Rule 3D, i.e., Section 17(2)(iii)(c), will be taxable. whereas the limit given in Rule 3D is not crossed, so the prerequisites given as per Rule 3D, i.e., 17(2)(vi), will not be taxable.
Thus, Rule 3C is to provide relief to those with low incomes, and Rule 3D is to provide relief to those with middle incomes.
List of Perquisites
| Perquisite | Example | Tax Position |
|---|---|---|
| Rent-free accommodation | Flat/Quarter provided by the employer | Taxable if Salary > ₹4L |
| Company Car / Driver | The office car is used for personal purposes | Taxable if Salary > ₹4L |
| Concessional House/Furniture | Company/PSU house at subsidised rent | Taxable if Salary > ₹4L |
| Domestic Help/Guard/Cook | Cook, watchman, gardener, etc. | Taxable if Salary > ₹4L |
| Perquisite | Example | Tax Status |
|---|---|---|
| Free or Subsidised Food | Free meals in the office canteen | Taxable if GTI > ₹8L |
| Club Membership/Entertainment | Gym, sports club, golf club fees | Taxable if GTI > ₹8L |
| Gifts / Vouchers / Coupons | Exempt up to ₹5,000; above taxable | Taxable if GTI > ₹8L |
| Concessional Travel Facility | Free/discounted travel from the employer | Taxable if GTI > ₹8L |
| Shares/ESOPs | Employer shares at below market value | Taxable if GTI > ₹8L |
Notes:
Salary ≤ ₹4L → Rule 3C perquisites NOT taxable.
GTI ≤ ₹8L → Rule 3D perquisites are NOT taxable.
Above both limits → All perquisites taxable.
GTI ≤ ₹8L → Rule 3D perquisites are NOT taxable.
Above both limits → All perquisites taxable.
Explanation in Hindi
1. Rule 3C – 4 लाख की सीमा (Salary Income):
अगर किसी कर्मचारी की सालाना वेतन आय ₹4 लाख से ज़्यादा है, तभी उसके perquisites/सुविधाओं पर टैक्सेशन नियम लागू होगा।2. Rule 3D – 8 लाख की सीमा (Gross Total Income):
अगर किसी व्यक्ति की कुल सकल आय (Gross Total Income) ₹8 लाख से ज़्यादा है, तभी perquisites/सुविधाओं के मूल्यांकन (valuation of perquisites) का नियम लागू होगा।यह नियम 18 अगस्त 2025 से प्रभावी होगा (गजट नोटिफिकेशन जारी होने की तारीख)।
उद्देश्य:
आयकर में मिलने वाली सुविधाओं (जैसे मकान, गाड़ी, क्लब मेंबरशिप आदि) के टैक्स निर्धारण में पारदर्शिता और स्पष्टता लाना और छोटे वेतनधारी कर्मचारियों को राहत देना।
The Notification can be accessed at: https://incometaxindia.gov.in/news/notification-no-133-2025.pdf
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