Rule 17: Salary threshold for specified benefits
Rule 17 prescribes ₹4,00,000 as the salary-income amount for section 17(1)(c)(ii). It helps identify the employees covered by that particular benefits-or-amenities limb of the perquisite definition.
Official notified Income-tax Rules, 2026Need advice on Rule 17?
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Bare law
Rule 17 - Salary income for purposes of section 17(1)(c)(ii)
For the purposes of section 17(1)(c)(ii), the prescribed income under the head "Salaries" shall be ₹ 400000.
Introduction
This amount is not the general income-tax exemption limit, a salary deduction or a tax slab. Its function comes from the specific provision to which the rule refers.
Rule breakdown
Locate the correct perquisite limb
Section 17(1)(c) addresses the value of benefits or amenities granted free or at a concessional rate. Sub-clause (ii) covers the stated employee category whose monetary salary exceeds the prescribed amount. Rule 17 supplies that amount.
Review the employee’s relationship to a company first: directors and employees with substantial interest are separately addressed by sub-clause (i).
Use monetary salary from the relevant employers
The parent text refers to income under Salaries by way of monetary payment from one or more employers. Do not check only one employer’s cash payroll when the employee has relevant monetary salary from another employer.
The threshold is not a direction to add the value of the very non-monetary benefit being tested to the monetary-payment figure without considering the statutory wording.
Distinguish exceeding the amount from reaching it
Section 17(1)(c)(ii) uses “exceeds”. Monetary salary of exactly ₹4,00,000 does not exceed that figure; ₹4,00,001 does. This comparison concerns only the stated limb and does not rule out taxability under other parts of section 17.
Illustrative payroll review
Hypothetical: an employee outside sub-clause (i) has ₹2,50,000 of monetary salary from one employer and ₹2,00,000 from another. The combined ₹4,50,000 exceeds the prescribed amount. The relevant benefit must then be considered under the applicable perquisite provisions and valuation rules.
The example identifies the threshold position; it does not assign a value to the benefit or calculate the employee’s final tax.
Keep the payroll evidence together
Record the employee category, monetary salary information from relevant employers, the benefit or amenity provided and the valuation provision used. Review exemptions separately rather than treating the threshold as an all-purpose exemption.
Key takeaways
Prescribed amount
The rule specifies ₹4,00,000.
Monetary salary matters
The parent clause refers to salary by way of monetary payment from one or more employers.
Apply the correct employee category
The clause excludes the company director or substantial-interest employee addressed separately in section 17(1)(c)(i).
Practical checklist
- Check the employee category under section 17(1)(c).
- Consider monetary salary from all relevant employers.
- Record threshold and valuation decisions separately.
Avoid
- Do not call ₹4,00,000 a general tax-free salary limit.
- Do not replace “exceeds” with “equals or exceeds”.
- Do not assume other perquisite limbs disappear below the threshold.
FAQs
Is ₹4,00,000 a basic exemption limit?
No. It is the prescribed amount for the particular perquisite limb in section 17(1)(c)(ii).
Does exactly ₹4,00,000 exceed the threshold?
No. The parent clause uses “exceeds”; other applicable perquisite provisions still need consideration.
Can salary from more than one employer count?
Yes. The parent provision expressly refers to monetary salary from one or more employers.
Glossary
- Monetary salary
- Salary income by way of monetary payment as described in the parent clause.
- Prescribed threshold
- The ₹4,00,000 amount supplied by Rule 17 for that specific clause.