New I-T Rules: Benefits for meal vouchers to EVs, higher HRA limit for four more cities

Benefits of meal vouchers for employees under the new income tax regime which was not allowed earlier; revision of valuation criteria for employer-provided perks such as inclusion of electric vehicles; hike in children education and hostel allowances — these are some of they key features that are part of the new Income-tax Rules, 2026 that will come into effect from April 1. In a notification on Friday, the Central Board of Direct Taxes (CBDT) also expanded the list of eligible cities for the higher 50% house rent allowance (HRA) benefit to four major cities — Bengaluru, Hyderabad, Pune and Ahmedabad, bringing them at par with the metropolitan cities of Mumbai, Kolkata, Delhi, Chennai.

HRA benefits and other claims by salaried employees, however, will now face greater scrutiny as they will now be required to provide evidence for those claims in a separate form at the time of computation of income and tax deduction at source (TDS) by employers. This implies it will now be mandatory for employees to give details of the landlord if they claim the HRA benefit. However, the PAN of the landlord has to be furnished only if the aggregate rent paid during the tax year exceeds Rs 1 lakh. The new Income-tax Act, 2025 had introduced the concept of ‘tax year’ as the 12-month period beginning from April 1, removing the existing term of ‘assessment year’.

EVs in perquisites

Under the new rules, monthly taxable perquisite value for an EV used partly for official and partly for personal purposes will be: Rs 5,000 per month (plus Rs 3,000 if a chauffeur is provided) where the employer bears the running and maintenance expenses; or Rs 2,000 per month (plus Rs 3,000 if chauffeur is provided) where the employee bears the cost of personal‑use running and maintenance. Amit Maheshwari, Managing Partner, AKM Global, a tax and consulting firm said the updation of perquisite rules to explicitly include electric vehicles within the concessional valuation slab for employer-provided motor cars and expansion of 50% HRA benefit to major cities apart from the four metros are the two major changes for individual taxpayers. “EVs are now treated at par with cars having engine capacity not exceeding 1.6 litres for the purpose of valuing perquisites when the vehicle is used partly for official duties and partly for personal purposes…this amendment was necessary because earlier rules linked perquisite valuation solely to an engine‑capacity threshold, an attribute irrelevant for electric vehicles. By formally adding EVs to the concessional slab, the government removes long‑standing ambiguity for employers and payroll teams,” he said.

Meal vouchers, hike in allowances

While most of the tax benefits for perquisites are under the old tax regime, one of the key inclusions for employees under the new income tax regime are meal coupons under the notified rules. The I-T rules specify exemption for “free food and non-alcoholic beverages” provided by employers during working hours at office or business premises or “through paid vouchers usable only at eating joints” for value not exceeding Rs 200 per meal. Perquisites are employer-provided non-cash benefits to employees such as meals, company-provided cars, interest-free loans, among others.

“Meal vouchers up to Rs 200 per meal are not taxable and this is also applicable for those under the new tax regime. This will equate to Rs 4400 for one meal a day or Rs 8800 for two meals a day basis 22 working days a month,” Suresh Kumar S, Partner, Deloitte India, said.

The earlier rules had a proviso stating that free food and non-alcoholic beverages provided by the employer through paid vouchers will not be applicable to employees who have opted for Section 115BAC (new tax regime), which is not the case in the newly notified rules. “Crucially, the old carve‑out that denied this small‑meal relief to employees opting for the new regime has not been carried forward. In the 1962 framework, Rule 3(7)(iii) expressly taxed meal benefits for 115BAC opt‑ins even below the then limit (Rs 50), but that restriction seems absent in the 2026 text. So, the benefits should be available for the new regime as well,” Maheshwari said.

The children’s education allowance has been increased from Rs 100/month per child to Rs 3,000 (up to two children), and hostel expenditure allowance from Rs 300 per month per child to Rs 9,000 (up to two children).

HRA benefits for limited cities

While the HRA benefits expansion to four major cities of Bengaluru, Hyderabad, Pune and Ahmedabad was welcomed by experts, some noted that other high-rent, high-density employment hubs like Noida, Gurugram, and Navi Mumbai have been left out. “These cities will continue to fall under the 40% HRA bracket. The expectation was that the rapid urbanisation and high rental costs in NCR extensions and satellite cities would justify their inclusion. However, the government’s approach appears to focus on cities whose economic and taxpayer concentration has reached Tier‑1 levels over the past decade,” Maheshwari said.

Higher thresholds for PAN

The new Income-tax Rules also defined higher monetary thresholds for quoting PAN for deposits, withdrawals, purchase of motor vehicles and property transactions. PAN will be mandatory for: cash deposits or withdrawals aggregating to Rs 10 lakh or more in a financial year, in one or more accounts of a person. At present, PAN is required to be quoted for cash deposits exceeding Rs 50,000 during any one day with a banking company or a co-operative bank. For purchase of motor vehicles, the threshold for quoting PAN has been set at Rs 5 lakh (including motorcycles). Under the current I-T rules, PAN was required to be cited for sale or purchase of a motor vehicle or vehicle, other than two-wheelers.

In the hospitality sector, PAN will be mandatory for hotel or restaurant bills, or convention centres or banquet halls or for payment to a person engaged in event management, for payments over Rs 1 lakh. At present, PAN is mandatory for payments exceeding Rs 50,000 in case of hotel or restaurant bills. Also, PAN will be mandatory if the transaction cost is over Rs 20 lakh, nearly double the existing limit of Rs 10 lakh, in case of purchase or sale or gift or joint development agreement of any immovable property.

Aanchal Magazine is a Deputy Associate Editor with The Indian Express, serving as a leading voice on the macroeconomy and fiscal policy. With 15 years of newsroom experience, she is recognized for her ability to decode complex economic data and government policy for a wider audience. Expertise & Focus Areas: Magazine’s reporting is rooted in "fiscal arithmetic" and economic science. Her work provides critical insights into the financial health of the nation, focusing on: Macroeconomic Policy: Detailed tracking of GDP growth, inflation trends, and central bank policy actions. Fiscal Metrics: Analysis of taxation, revenue collection, and government spending. Labour & Society: Reporting on labour trends and the intersection of economic policy with employment. Her expertise lies in interpreting high-frequency economic indicators to explain the broader trajectory of the Indian economy. Personal Interests: Beyond the world of finance and statistics, Aanchal maintains a deep personal interest in the history of her homeland, Kashmir. In her spare time, she reads extensively about the region's culture and traditions and works to map the complex journeys of displacement associated with it. Find all stories by Aanchal Magazine here ... Read More