For many salaried employees, rising inflation has made everyday expenses significantly more expensive over the past decade. But according to Chartered Accountant Nitin Kaushik, several salary-related tax exemptions in India still operate on limits fixed decades ago, creating a widening mismatch between real-life costs and tax rules.

In a recent social media post, CA Kaushik argued that many employee tax perks have become “mathematically irrelevant” because exemption limits have failed to keep pace with inflation, urban living costs, and changing spending patterns.

“The tax exemptions for your daily life are mathematically irrelevant,” Kaushik wrote on X. “Most of these limits haven’t been adjusted in decades, meaning you are paying tax on money that barely covers a fraction of your actual expenses.”

Children Education Allowance

One of the clearest examples, according to him, is the Children Education Allowance. Under current tax rules, salaried employees can claim an exemption of just ₹100 per month per child, or ₹1,200 annually.

“In a reality where private school fees run into thousands, the government only recognizes ₹1,200 a year as a valid deduction,” Kaushik said, pointing out that the exemption amount no longer reflects actual education expenses faced by middle-class families.

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The mismatch becomes even sharper in the case of hostel expenditure allowance, which remains capped at ₹300 per month per child.

“Unless you found a hostel that costs ₹10 a day, you are paying for your child’s housing with post-tax income that should have been exempt,” he noted.

Food allowances

Food allowances, once considered a meaningful salary perk, have also lost relevance due to inflation. Meal vouchers or food coupons are tax-exempt only up to ₹50 per meal.

“In any major city, a basic lunch costs three times that,” Kaushik wrote. “You are effectively being taxed on the benefit of eating a standard meal at work.”

The same issue applies to tax-free gifts and festival vouchers provided by employers. Current rules allow exemptions only up to ₹5,000 annually. Any amount above that is added to taxable salary income.

Kaushik also highlighted employer-provided interest-free loans, often used during medical emergencies or family functions such as weddings. Under present rules, only loans up to ₹20,000 are exempt from perquisite taxation. Beyond that, employees are taxed based on State Bank of India lending rates.

According to Kaushik, these limits may have made sense years ago, but they have become outdated in today’s economy where medical bills, rents, education costs, and lifestyle expenses have risen sharply.

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Salary perks

Ironically, he pointed out that one of the few salary perks that still benefits employees is company car taxation. The taxable value for employer-provided cars continues to be calculated using fixed monthly amounts of ₹1,800 or ₹2,400 based on engine size, with an additional ₹900 for drivers.

“These fixed numbers are the only part of the code that actually works in your favor by underestimating real costs,” he said.

The issue has resonated widely with salaried professionals online, many of whom believe older exemptions under the income tax framework no longer provide meaningful relief.

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While India has revised tax slabs multiple times and introduced the new tax regime, experts say several legacy exemptions continue to remain frozen at levels set years ago. The growing debate has renewed calls for periodic inflation-linked revisions in employee tax exemptions so that salary structures reflect modern living costs rather than outdated assumptions from another era.

Published on: May 7, 2026 8:25 AM IST