Picture a firm of forty consultants. Everyone is on a similar band. One person rents in Bengaluru and sends two children to school. Another owns a flat outright and has no dependants. A third drives 200 kilometres a week to client sites.
Pay all three an identical fixed structure, and you overpay on tax for all three. The renter gets no benefit from a car allowance. The homeowner gets nothing from the house rent allowance. The road warrior gets nothing from a hostel allowance.
An FBP fixes that mismatch without touching your salary budget. You publish a basket, say 15 to 25 percent of CTC, and let each person route it to the components that match their real spending. Whatever they route correctly and support with bills becomes exempt or partly exempt. Whatever they leave unclaimed comes back as a taxable special allowance.
For the employer, the arithmetic is neutral. Your outflow is the same whether an employee takes the basket as meal vouchers or as taxable cash. For the employee, the difference can run into tens of thousands of rupees a year. That asymmetry is the whole reason FBP became standard practice in Indian professional services firms.
What Changed On 1 April 2026
This is the section that matters most, because almost every FBP guide on the internet is now out of date.
The Income-tax Act, 1961 has been replaced by the Income-tax Act, 2025, which came into force on 1 April 2026. Alongside it, the Central Board of Direct Taxes notified the Income-tax Rules, 2026 on 20 March 2026, with effect from the same date. Several perquisite and allowance limits that had been frozen for two decades were raised sharply.
Here is what moved.
| Component | Earlier limit | Limit from 1 April 2026 |
| Free food and non-alcoholic beverages, including paid meal vouchers usable only at eating joints | Rs 50 per meal | Rs 200 per meal |
| Children education allowance | Rs 100 per month per child | Rs 3,000 per month per child |
| Children hostel allowance | Rs 300 per month per child | Rs 9,000 per month per child |
| Gifts, vouchers, or tokens from the employer, nil perquisite if below this aggregate | Rs 5,000 per year | Rs 15,000 per tax year |
| Interest-free or concessional employer loan, no perquisite value up to this aggregate | Rs 20,000 | Rs 2,00,000 |
| Employer-provided education, valuation threshold | Rs 1,000 per month per child | Rs 3,000 per month per child |
| Company car up to 1.6 litres or an electric vehicle, running costs met by employer | Rs 1,800 per month | Rs 5,000 per month |
| Company car above 1.6 litres, running costs met by employer | Rs 2,400 per month | Rs 7,000 per month |
| Chauffeur, added to the car perquisite value | Rs 900 per month | Rs 3,000 per month |
Two more changes reshape FBP administration.
Four cities joined the 50 percent HRA list. Ahmedabad, Bengaluru, Hyderabad, and Pune now sit alongside Delhi, Mumbai, Kolkata, and Chennai for the purpose of the 50 percent of salary limb in the HRA calculation, per KPMG’s summary of the notified Rules. Eight cities, up from four. If your delivery centre is in Bengaluru or Pune, every renting employee on the old regime is entitled to a larger exemption from April 2026 onward.
The declaration form changed. Form 12BB has been replaced by Form 124, and Form 16 by Form 130. Form 124 asks the employee to disclose their relationship with the landlord for whom HRA is claimed, and it expects supporting documents such as the rent agreement as annexures.
Read those two together, and one thing becomes clear. The employee-facing side of FBP got more generous. The employer-facing side got more documentary. Your payroll configuration and your proof-collection workflow both need a pass before the next declaration window opens.
A note on the electric vehicle line in that table. The 2026 Rules put electric vehicles in the same bracket as cars up to 1.6 litres, which removes an ambiguity that used to invite different readings across payroll teams.
FBP Components And What They Are Worth
Most Indian FBP menus draw from the same pool. What varies is which components an employer offers and what internal cap it sets on each.
House rent allowance. The largest lever for most employees. The exemption is the least of three amounts: the HRA received, rent paid minus 10 percent of salary, and 50 percent of salary in the eight listed cities or 40 percent elsewhere. Salary here means basic plus dearness allowance plus commission computed on turnover.
Leave travel concession. Covers domestic travel fare for the employee and family, twice in a block of four calendar years. The 2026 Rules changed the ceiling for air travel to the fare admissible for the class the employee is entitled to, by the shortest route. For bus travel in areas without a recognised public transport system, the calculation is now a flat Rs 30 per kilometre.
Meal cards and food vouchers. Now exempt up to Rs 200 per meal where the vouchers are usable only at eating joints. On a 22 working day month with one meal a day, that moves the annual exempt figure from about Rs 13,200 to about Rs 52,800.
Children education and hostel allowance. Rs 3,000 per month per child and Rs 9,000 per month per child respectively, for up to two children. The old figures of Rs 100 and Rs 300 had been unchanged so long that many payroll systems still carry them as hard-coded defaults. Check yours.
Fuel and vehicle reimbursement. Valued as a perquisite rather than exempted as an allowance, using the car table above. The value depends on engine size, on who pays for running and maintenance, and on whether a chauffeur is provided.
Telephone and internet reimbursement. The 2026 Rules continue to keep telephone expenses, including a mobile phone, outside the residual perquisite valuation rule. Laptops, computers, tablets, and mobile phones are also excluded from the movable-asset perquisite charge.
Books and periodicals, professional development, uniform allowance. Smaller lines, generally tied to actual expenditure and to relevance to the role.
Employer NPS contribution: Worth separating from the rest, because it survives under the new regime while most of the above does not. More on that next.
If any of those terms are new to you, the payroll glossary and the entry on statutory deductions are a useful starting point.
Old Regime Versus New Regime: Where FBP Still Pays
Every FBP conversation in India now runs into a single gate.
The new tax regime, at Section 202 of the Income-tax Act, 2025, is the default. It corresponds to what was Section 115BAC under the earlier Act. It offers lower slab rates, a standard deduction of Rs 75,000 for salaried taxpayers, and a rebate that leaves salaried income up to roughly Rs 12.75 lakh with no tax. In exchange it removes most of the exemptions that make an FBP worth structuring, including house rent allowance and leave travel concession. Employer contribution to the notified pension scheme, up to 14 percent of salary, remains available.
An employee has to opt out of the default and into the old regime to use the FBP levers in full.
What this means in practice:
- For employees below roughly Rs 12 to 13 lakh of total income, the new regime usually wins outright, and the FBP basket is largely decorative for them.
- For employees paying substantial rent in one of the eight 50 percent cities, with children in school, and with meal card and fuel usage, the old regime plus a fully claimed FBP can still come out ahead. The 2026 limit increases widened that gap rather than narrowing it.
- Your firm will have people on both sides of that line, and your payroll setup has to run both cleanly in the same cycle.
One point worth flagging to your tax advisor rather than guessing at. Some FBP lines are exemptions of allowances, which the new regime plainly restricts. Others, such as the meal voucher and gift voucher limits, sit in the perquisite valuation rules instead. The treatment of that second group under the new regime is read differently by different practitioners. Get a written position from your auditor and configure payroll to match it, rather than letting each payroll operator interpret it in the moment.
What The 2026 Limits Are Worth: A Worked Illustration
Take a consultant in Bengaluru on the old regime, in the 30 percent slab, with basic salary of Rs 7,20,000, HRA of Rs 3,60,000, rent of Rs 45,000 a month, two school-age children, and a meal card used on 22 working days a month.
| Line | Exempt amount, earlier rules | Exempt amount, 2026 rules | Difference |
| HRA, Bengaluru moving from 40% to 50% | Rs 2,88,000 | Rs 3,60,000 | Rs 72,000 |
| Children education allowance, two children | Rs 2,400 | Rs 72,000 | Rs 69,600 |
| Meal card, one meal per working day | Rs 13,200 | Rs 52,800 | Rs 39,600 |
| Gift vouchers | Rs 5,000 | Rs 15,000 | Rs 10,000 |
| Total additional exempt income | Rs 1,91,200 |
At a 30 percent slab plus 4 percent cess, that additional exempt income is worth roughly Rs 59,700 a year to this one employee, at zero additional cost to the employer.
The caveats matter. This assumes the old regime, full and timely proof submission, and that the HRA calculation binds on the 50 percent limb, which requires rent to be high relative to basic salary. Run the numbers for your own bands before you promise anything to anyone.
Still, Rs 59,700 of take-home improvement for no incremental payroll spend is a retention argument that costs a firm nothing but configuration effort.
How An FBP Declaration Runs Through The Year
The declaration is where FBP either works or quietly falls apart.
April, the window opens. You publish the component menu, the cap per component, and the total basket. Employees allocate. Most firms run this through a self-service portal so that HR is not collating a spreadsheet of forty preferences by email. If you have an employee self-service portal, this is the workflow it earns its keep on.
Through the year, payroll pays against the declaration. The declared amounts flow into the monthly salary structure. TDS is computed on the basis that the exemptions will be substantiated.
The proof deadline, usually January or February. Employees upload rent agreements, rent receipts, landlord PAN where annual rent crosses Rs 1,00,000, travel tickets, fuel bills, phone bills, and invoices. Under Form 124 they also disclose the landlord relationship.
March, the reconciliation. Anything declared but not proven is added back as taxable salary, and the TDS on it lands in the final payroll of the year.
That last step is where the trouble sits. An employee who declared Rs 1,50,000 of components and produced bills for Rs 40,000 will see a March payslip far smaller than the eleven before it. They will not have modelled it. They will come to HR, and they will be upset.
Two habits prevent almost all of that pain. Send proof-submission reminders in November, December, and early January rather than one notice in February. And show each employee a running view of declared versus substantiated, so the shortfall is visible in month seven instead of month twelve.
New joiners need their own handling. Someone joining in October cannot use a full-year basket, and the pro-rated version has to be set at onboarding rather than patched in later.
The Part Project-Based Firms Tend To Miss
Here is where FBP stops being an HR topic and becomes an operations topic.
In a professional services firm, an employee is a cost that gets loaded onto projects. Your cost rate per person drives your project margin. When forty people restructure their salary in April, and again when March reconciliation moves money between exempt and taxable heads, the composition of that cost changes.
The total stays the same. CTC is CTC. What moves is where the money sits and when it hits the books. Reimbursement-based components pay out on bill submission rather than on a fixed monthly date, which means your cost recognition against a project can lag the month in which the work was delivered. A fuel reimbursement claimed in March for travel done in November lands in the wrong period unless someone is watching.
For a firm running fixed-fee engagements, that timing gap distorts margin reporting on individual projects. For a firm on time and materials, it distorts the cost side of realised rate.
Firms that keep HR and project delivery in separate systems usually find this out at quarter close, when the finance lead asks why a delivered project’s margin moved after the project ended. The answer is normally sitting in a reimbursement queue.
The fix is not complicated. It requires that salary structure, reimbursement approvals, and project cost allocation live where they can see each other. Which is a reasonable moment to say what Juntrax does.
Where Juntrax Fits
Juntrax is a project-to-cash operations layer. HRMS, professional services automation, and cash flow run on one platform rather than three, which matters for FBP specifically in a few places.
Payroll and reimbursements sit in the same system. Employees declare and submit through the self-service portal, approvals route without an email chain, and the payout is tied to the same employee record that carries the salary structure. HR is not reconciling a benefits spreadsheet against a payroll file.
Because the PSA side shares that record, the cost of a person flows into project allocation and margin reporting from the same source of truth. When a reimbursement is approved, the cost lands against the right project and the right period instead of arriving as a journal entry three weeks later.
Multi-entity firms get the version of this that matters to them. If you run an India entity and a GCC entity, the FBP rules apply to one and not the other, and both sets of employees need to sit in one system without their salary logic bleeding into each other.
Juntrax works alongside your accounting system rather than replacing it. Tally, QuickBooks, Xero, and similar tools keep the books. Juntrax runs the operations layer that feeds them, and keeps an audit trail of who declared what and who approved it.
Pricing starts at 5 dollars per user per month, and the pricing page has the plan detail.
An FBP Setup Checklist For 2026 And Beyond
Work through these before your next declaration window.
- Update every hard-coded limit. Meal vouchers at Rs 200 per meal. Children education allowance at Rs 3,000 per month per child. Hostel allowance at Rs 9,000. Gift vouchers at Rs 15,000 aggregate. Car perquisite values per the 2026 table.
- Reclassify your city masters. Ahmedabad, Bengaluru, Hyderabad, and Pune move to the 50 percent HRA limb. Check the city field on every employee record, because plenty of people live in a different city from the office they are mapped to.
- Switch to Form 124 and Form 130. Form 12BB and Form 16 are retired. Form 124 needs a landlord relationship field and document annexures.
- Get a written regime position. Ask your auditor to confirm, in writing, the treatment of perquisite-based FBP lines under Section 202. Configure to that position.
- Set caps that reflect real spending. A cap nobody can substantiate produces a March shortfall, not a tax saving.
- Build the reminder cadence. November, December, early January. Not one notice in February.
- Give employees a live declared-versus-proven view. Visibility in month seven prevents the month twelve conversation.
- Map reimbursement timing to project periods. Decide how a late-claimed reimbursement is recognised against a closed project before it happens.
- Handle pro-rated joiners at onboarding. Set the basket when the record is created.
- Document the policy. One page, published, in the same place as your expense policy.
The Short Version
FBP full form is Flexible Benefit Plan, and it lets employees reshape part of their CTC into components that carry tax relief. The 2026 Rules made several of those components materially more valuable, especially meal cards, children education allowance, and HRA for employees in Ahmedabad, Bengaluru, Hyderabad, and Pune.
The catch is that the relief mostly lives in the old tax regime, which is no longer the default. So the plan is worth real money to some of your people and close to nothing for others, and your payroll has to run both without breaking.
And once the plan is live, it stops being purely an HR matter. Declarations move cost composition, reimbursements move cost timing, and both land on project margin. Firms that run HR, projects, and cash flow in one place see that connection. Firms running three systems find it at quarter close.
Frequently Asked Questions
What Is The FBP Full Form?
FBP full form is Flexible Benefit Plan. It is a salary arrangement in which the employer allocates part of an employee’s Cost to Company to a basket of pre-approved components, and the employee chooses how to distribute that basket. It is also called a flexi benefit plan, flexi pay, or a cafeteria plan.
Is FBP Part Of CTC Or Extra Pay On Top?
FBP is part of CTC, not an addition to it. The employer’s total cost stays the same. What changes is how much of that total reaches the employee as tax-relieved components rather than as fully taxable special allowance.
What Happens If I Do Not Submit FBP Proofs?
Any declared amount you cannot substantiate is added back to your taxable salary, and TDS on it is deducted in the final payroll of the financial year, usually March. Unclaimed FBP cannot be carried forward to the next year.
Does FBP Save Tax Under The New Tax Regime?
Mostly no. The new regime under Section 202 of the Income-tax Act, 2025 removes most of the exemptions FBP relies on, including house rent allowance and leave travel concession. Employer contribution to the notified pension scheme remains available. To use the FBP levers in full, an employee has to opt into the old regime.
How Much Is The Meal Voucher Exemption Now?
The Income-tax Rules, 2026 raised the limit for free food and non-alcoholic beverages, including paid vouchers usable only at eating joints, from Rs 50 per meal to Rs 200 per meal with effect from 1 April 2026.
Which Cities Qualify For The 50 Percent HRA Limit?
Eight cities, following the Income-tax Rules, 2026: Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Pune. Employees elsewhere use the 40 percent limb. This applies only where the employee is on the old tax regime.
Can An Employee Change Their FBP Declaration Mid-Year?
That depends on employer policy. Most firms open the window in April and allow limited revisions, often at a single mid-year checkpoint. Some allow changes on a qualifying life event such as a relocation or a new child.
How Much Of CTC Should Sit In The FBP Basket?
There is no statutory figure. Indian employers commonly set the basket between 15 and 25 percent of CTC. The practical constraint is what your employees can realistically substantiate with bills, since anything unproven simply returns as taxable salary.