Under the Income Tax (Deduction for Payment of Care Allowance of Parents and Grandparents) Rules 2026, gazetted as P.U. (A) 231, employers who pay a care allowance to their employees for the purpose of caring for parents, adoptive parents, or grandparents are now entitled to deduct that expense when computing their adjusted income from business. The rules are deemed to have effect from the year of assessment 2025.

There is one important safeguard to be aware of. The Director General of Inland Revenue has the discretion to disallow any portion of the deduction that exceeds what would reasonably be expected in the ordinary course of business. So the allowance paid must be commercially justifiable in the context of your business.

It is also worth noting that this deduction is granted in addition to, and not in place of, the existing deductions available under section 33 of the Income Tax Act 1967.

For businesses looking to use this benefit correctly, the key is proper documentation. The care allowance must be a genuine payment to an employee, and the amount must be reasonable.

If you are unsure whether your existing employee benefits qualify or how to structure this correctly, our CFO advisory team can help you assess your position. Reach us on WhatsApp at 010-246 2151.