Draft Income-Tax Rules 2026 Propose Higher Tax-Free Meal Benefits, Revised Valuation for Company Car Perks

The Indian government’s draft Income-Tax Rules, 2026 propose changes that could impact salaried employees by increasing tax-free allowances on meal benefits while raising the taxable value of certain company-provided perks.

Higher Tax-Free Limit on Meal Vouchers

Under the draft proposal, the tax-exempt limit for meal vouchers and subsidised office meals may increase from ₹50 per meal to ₹200 per meal. If implemented, eligible employees could potentially claim up to ₹1.05 lakh per year as tax-free benefits, subject to the conditions of their chosen tax regime.

This move is expected to benefit employees who use meal cards or digital vouchers issued by companies such as Pluxee (formerly Sodexo) and Zaggle, or those who avail subsidised meals through employer-operated canteens.

Tax experts note that the higher exemption limit could provide meaningful relief, particularly for employees in urban areas where food costs are relatively higher. However, eligibility will depend on compliance with documentation and payroll structuring norms under the applicable tax regime.

Higher Taxable Value for Company Cars

At the same time, the draft rules propose a higher taxable valuation for employees using company-provided cars for both official and personal purposes.

The revised calculation is based on fixed monthly values:

• If the employer covers fuel and maintenance, the taxable perk is valued at ₹5,000 per month.

• If a driver is also provided, an additional ₹3,000 per month is added.

This results in a combined taxable value of ₹8,000 per month, or ₹96,000 per year, which will be added to the employee’s taxable income.

According to illustrative estimates, an employee earning ₹15 lakh annually could face an additional tax burden of approximately ₹4,352, while someone earning ₹25 lakh per year may pay around ₹8,387 more in taxes, depending on their applicable slab rate.

Impact Across Tax Regimes

Experts point out that the method of valuing perquisites, including company cars, remains consistent under both the old and new tax regimes. While the new regime offers lower tax rates with fewer exemptions, it does not alter how benefits such as employer-provided vehicles are assessed for taxation.

As a result, employees will need to evaluate whether the higher meal voucher exemption offsets the increased taxable value of company car benefits in their individual tax planning.

Balancing Relief and Compliance

The draft rules reflect a balancing approach: expanding tax relief on daily consumption benefits such as meals while tightening the valuation framework for higher-value perquisites like company cars.

If notified in their current form, the changes could reshape salary structuring strategies for employers and employees alike. Companies may need to reassess compensation packages, while employees will likely review their benefit selections to optimise tax efficiency under the evolving framework.