The draft Income Tax Rules 2026, released as part of the transition to the new income tax framework effective from 1 April 2026, propose several changes that will affect how perquisites (non‑cash benefits) are taxed for salaried people. One of the most important updates is that the taxable value of company‑provided cars — a popular perk — is set to increase significantly, leading to a higher tax burden for many employees.

📌 What Are Perquisites and Why It Matters

Perquisites are benefits provided by employers to employees beyond basic salary — such as company cars, drivers, meals, and gifts — that are considered part of the employee’s taxable income.

Under the draft rules, the way these perquisites are valued for tax purposes has been updated to reflect current economic realities, replacing outdated values that had remained unchanged for decades.

🚗 How Company car Perq Valuation Is Changing

The draft Income Tax Rules 2026 propose higher valuation rates for company‑provided motor cars when they’re used for both official and personal purposes. This means that the taxable benefit added to your salary will be higher — and so will your tax.

Under the Current (Old) Rules

• Car (≤1.6 L engine): ₹1,800 per month
• Car (>1.6 L engine): ₹2,400 per month
• Driver benefit (any car): ₹900 per month

Under Draft Rules 2026

• Car (≤1.6 L engine): ₹5,000 per month
• Car (>1.6 L engine): ₹7,000 per month
• Driver benefit (any car): ₹3,000 per month

This major increase in perquisite valuation reflects a shift toward current market costs instead of decades‑old fixed amounts.

📊 How It Impacts Your Tax Liability

Because the perquisite value gets added to your taxable income, your overall tax bill rises accordingly.

For example:

• On a ₹15 lakh salary, the draft rules could result in around ₹4,352 extra tax due to the higher car perk valuation.
• For a ₹25 lakh salary, extra tax could be around ₹8,387 under the draft rules.

These figures assume that the taxpayer uses the company car for both official and personal purposes and that the employer covers running and maintenance costs.

📍 What Triggers the Higher Tax?

The increased taxation applies when:

• The employer provides the car for mixed use — both official and personal.
• Maintenance and running costs are paid or reimbursed by the employer.
• A driver/chauffeur is included as part of the benefit.

In such cases, the enhanced perquisite value becomes part of your taxable salary under Section 17 of the Income‑tax Act, and TDS (tax deducted at source) may increase accordingly.

🧾 Does It Depend on the Tax Regime?

No. The draft rules’ valuation of perquisites — including the company car benefit — would apply regardless of whether you opt for the old or new tax regime, because it pertains to how benefits are valued under salary income rules.

🛠 Why This Change Is Being Proposed

• Outdated perquisite values: The old amounts (₹1,800/₹2,400/₹900 per month) haven’t kept pace with vehicle and chauffeur cost inflation.
• Fair valuation: The new draft aims to data-align benefits with real economic costs.
• Transparency: Consolidating perquisite valuation under updated norms should make taxation clearer, even though the immediate effect is higher tax for some employees.

📅 What’s Next?

These rules are currently in draft form and have been released for public consultation. Final versions may be amended before they come into force on 1 April 2026. If you receive a company car or other perquisites as part of your compensation, it’s a good idea to stay updated on the final notification.

✅ Takeaway for Salaried Employees

• The company car perk may become costlier tax‑wise under the proposed draft Income Tax Rules 2026.
• Higher taxable perquisite valuation means your income tax liability could rise if you use a company car for personal and official purposes.
• It’s wise to factor this into your tax planning for FY 2026‑27 onwards — especially if you receive vehicle benefits from your employer.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.