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Utilities

The Income Tax Bill 2025, introduced in the Lok Sabha on February 13, 2025, aims to simplify and modernize India's income tax laws by replacing the Income Tax Act of 1961. One of the key highlights of this new bill is the clarification and expansion of tax-free perquisites for salaried employees, particularly concerning vehicle usage for commuting. This article delves into how these changes will benefit employees and what it means for employers.
Tax-free perquisites are benefits provided by employers that are not considered taxable income for employees. These can include various forms of compensation, such as housing, medical expenses, and vehicle usage. The new bill focuses on clarifying and simplifying these benefits to reduce confusion and disputes.
Under the current Income Tax Act of 1961, the use of a vehicle provided by a company for commuting between home and office was considered a tax-free perquisite. However, the language was limited and sometimes led to disputes about whether the vehicle had to be owned by the employer. The new Income Tax Bill 2025 addresses this ambiguity by stating that any expenditure incurred by the employer for the use of a vehicle for commuting will be considered a non-taxable perquisite. This means that whether the employer provides the vehicle or reimburses the employee for travel expenses, the benefit remains tax-free[1][2].
Here are some key changes and highlights from the New Tax Bill 2025:
The changes in the New Tax Bill 2025 will have several positive impacts on salaried employees:
However, these changes might also introduce additional administrative burdens for employers, as they will need to verify and process more reimbursement claims[1].
While the new bill benefits employees, it may pose challenges for employers:
The New Tax Bill 2025 is a significant step towards simplifying India's tax laws and providing clarity on tax-free perquisites. By making commuting expenses non-taxable, it offers tangible benefits to salaried employees while potentially increasing administrative tasks for employers. As the bill is set to come into effect from April 1, 2026, both employees and employers should prepare for these changes to maximize their benefits and comply with the new regulations.