Finotax  Utility  Toolbar
Download & InstallKnow more

Taxability of Perquisites

Perquisite is defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. "Perquisite" includes: In terms of Notification No. 94/2009/ F.No.142/25/2009-S O (TPL), dated 18-12-2009, for the purpose of computing the income chargeable under the head Salaries with effect from 1st April 2009, the value of perquisites provided by the employer directly or indirectly to the assessee (hereinafter referred to as employee) or to any member of his household by reason of his employment shall be determined in the following manner:-

Valuation of Perquisites

As a general rule, the taxable value of perquisites in the hands of the employees is its cost to the employer. However, specific rules for valuation of certain perquisites as per the above said notification are briefly given below:

Residential accommodation provided by the employer

Union or State Government Employees - The value of perquisite is the license fee as determined by the Govt. as reduced by the rent actually paid by the employee.

Non Government Employees - The value of perquisite is an amount equal to

(i) 15% of salary in cities having population exceeding 25 lakhs as per 2001 census;

(ii) 10% of salary in cities having population exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 census; and

(iii) 7.5% of salary in any other place.

In case the accommodation provided is not owned by the employer, but is taken on lease or rent, then the value of the perquisite would be the actual amount of lease rent paid/payable by the employer or 15% of the salary, whichever is lower.

In both of above cases, the value of the perquisite would be reduced by the rent, if any, actually paid by / recovered from the employee.

Furnished Accommodation: The value would be the value of unfurnished accommodation as computed above, increased by 10% per annum of the cost of furniture(including TV/radio/refrigerator/AC/other gadgets). In case such furniture is hired from a third party, the value of unfurnished accommodation would be increased by the hire charges paid/payable by the employer. However, any payment recovered from the employee towards the above would be reduced from this amount.

Provided that nothing contained in this sub-rule shall apply to any accommodation provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site, or a dam site or a power generation site or an off-shore site-

Hotel Accommodation

The value of perquisite arising out of the above would be 24% of salary or the actual charges paid or payable to the hotel, whichever is lower. The above would be reduced by any rent actually paid by the employee. It may be noted that no perquisite would arise, if the employee is provided such accommodation on transfer from one place to another for a period of 15 days or less.

An employee, who is provided with accommodation at the new place of posting while retaining the accommodation at the other place, on account of his transfer from one place to another, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value with reference to the Table above for a period not exceeding 90 days and thereafter the value of perquisite shall be charged for both such accommodations in accordance with the above Table.

Use of Motor Car

S. No.CircumstancesEngine Capacity upto 1600 ccEngine Capacity above 1600 cc
1Where the motor car is owned or hired by the employer
1 (a) The motor car used wholly and exclusively in the performance of his official. duties;NilNil
1 (b) The motor car is used exclusively for the private or personal purposes of the employee or any member of his household and the running and maintenance expenses are met or reimbursed by the employer. Actual amount of expenditure incurred by the employer on the running and maintenance of motor car including remuneration paid by the employer to the chauffeur and increased by the amount representing normal wear and tear of the motor car less any amount charged from the employee for such use.
1 (c) The motor car is used partly in the performance of duties and partly for private or personal purposes of the employee or any member of his household and
(i) the expenses on maintenance and running are met or reimbursed by the employer
Rs. 1,800 (plus Rs. 900, if chauffeur is also provided to run the motor car)Rs. 2,400 (plus Rs. 900, if chauffeur is also provided to run the motor car)
(ii) the expenses on running and maintenance for such private or personal use are fully met by the assessee.
Rs. 600 (plus Rs. 900, if chauffeur is also provided by the employer to run the motor car)Rs. 900 (plus Rs. 900, if chauffeur is also provided to run the motor car)
2Where the employee owns the vehicle and the actual running and maintenance charges including remuneration of the chauffeur are met or reimbursed to him by the employer
2 (i) The reimbursement is for the use of the vehicle wholly and exclusively for official purposesNil
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
Nil
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
2 (ii) The reimbursement is for the use of the vehicle partly for official purposes and partly for personal or private purposes of the employee or any member of his household.Subject to the provisions of clause (B) of this sub-rule, actual expenditure incurred by the employer as reduced by the amount specified in Sl.No.(1)(c)(i) above.Subject to the provisions of clause (B) of this sub-rule, actual expenditure incurred by the employer as reduced by the amount specified in Sl.No.(1)(c)(i) above.
3Where the employee owns any other automotive conveyance but the actual running and maintenance charges are met or reimbursed to him by the employer
such reimbursement is for the use of the vehicle wholly and exclusively for official purposes;Nil
Provided that the documents specified in clause (B) of this sub-rule are maintained by the employer.
Not Applicable
such reimbursement is for the use of vehicle partly for official purposes and partly for personal or private purposes of the employee.Subject to the provisions of clause (B) of this sub-rule, the actual amount of expenditure incurred by the employer as reduced by the amount of Rs. 900.Not Applicable

Provided that where one or more motor-cars are owned or hired by the employer and the employee or any member of his household are allowed the use of such motor-cars (otherwise than wholly and exclusively in the performance of his duties), the value of perquisite shall be the amount calculated in respect of one car in accordance with Sl. No. (1)(c)(i) of the above Table as if the employee had been provided one motor-car for use partly in the performance of his duties and partly for his private or personal purposes and the amount calculated in respect of the other car or cars in accordance with Sl. No. (1)(b) of above Table as if he had been provided with such car or cars exclusively for his private or personal purposes.

(B) Where the employer or the employee claims that the motor-car is used wholly and exclusively in the performance of official duty or that the actual expenses on the running and maintenance of the motor-car owned by the employee for official purposes is more than the amounts deductible in Sl. No. 2(ii) or 3(iii) of above Table, he may claim a higher amount attributable to such official use and the value of perquisite in such a case shall be the actual amount of charges met or reimbursed by the employer as reduced by such higher amount attributable to official use of the vehicle provided that the following conditions are fulfilled:-
(a) the employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon;
(b) the employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.

Explanation - For the purposes of valuation, the normal wear and tear of a motor-car shall be taken at 10% per annum of the actual cost of the motor-car or cars.

Services of a sweeper, a gardener, a watchman or a personal attendant

The value of benefit to the employee or any member of his household resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant by the employer, shall be the actual cost to the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer for such services as reduced by any amount paid by the employee for such services.

Supply of Gas, Electric Energy or Water

The value of the benefit to the employee resulting from the supply of gas, electric energy or water for his household consumption shall be determined as the sum equal to the amount paid on that account by the employer. Where such supply is made from resources owned by the employer, without purchasing them from any other outside agency, the value of perquisite would be the manufacturing cost per unit incurred by the employer. Where the employee is paying any amount in respect of such services, the amount so paid shall be deducted from the value so arrived at.

Free / Concessional Educational Facility

The value of benefit to the employee resulting from the provision of free or concessional educational facilities for any member of his household shall be the amount of expenditure incurred by the employer or where the educational institution is itself maintained and owned by the employer or where free educational facilities for such member of employees' household are allowed in any other educational institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be the cost of such education in a similar institution in or near the locality. Where any amount is paid or recovered from the employee on that account, the value of benefit shall be reduced by the amount so paid or recovered:

Provided that where the educational institution itself is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, nothing contained in this sub-rule shall apply if the cost of such education or the value of such benefit per child does not exceed Rs. 1,000 p.m.

Interest free or Concessional Loan Facility

The value of the benefit to the assessee resulting from the provision of interest-free or concessional loan for any purpose made available to the employee or any member of his household during the relevant previous year by the employer or any person on his behalf shall be determined as the sum equal to the interest computed at the rate charged per annum by the State Bank of India as on the 1st day of the relevant previous year in respect of loans for the same purpose advanced by it on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household.

However, no value would be charged if such loans are made available for medical treatment in respect of diseases specified in rule 3A of these Rules or where the amount of loans are petty not exceeding in the aggregate Rs. 20,000:

Provided that where the benefit relates to the loans made available for medical treatment referred to above, the exemption so provided shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

Travelling, Touring Accommodation etc.

The value of travelling, touring, accommodation and any other expenses paid for or borne or reimbursed by the employer for any holiday availed of by the employee or any member of his household, other than concession or assistance referred to in rule 2B of these rules, shall be determined as the sum equal to the amount of the expenditure incurred by such employer in that behalf. Where such facility is maintained by the employer, and is not available uniformly to all employees, the value of benefit shall be taken to be the value at which such facilities are offered by other agencies to the public. Where the employee is on official tour and the expenses are incurred in respect of any member of his household accompanying him, the amount of expenditure so incurred shall also be a fringe benefit or amenity:

Provided that where any official tour is extended as a vacation, the value of such fringe benefit shall be limited to the expenses incurred in relation to such extended period of stay or vacation. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity.

Free Food and Non-alcoholic beverages

The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.

Any Gift or Voucher or Token

The value of any gift, or voucher, or token in lieu of which such gift may be received by the employee or by member of his household on ceremonial occasions or otherwise from the employer shall be determined as the sum equal to the amount of such gift:

Provided that where the value of such gift, voucher or token, as the case may be, is below five thousand rupees in the aggregate during the previous year, the value of perquisite shall be taken as nil.

Membership Fees, Annual Fees for Credit Card

The amount of expenses including membership fees and annual fees incurred by the employee or any member of his household, which is charged to a credit care (including any add-on-card) provided by the employer, or otherwise, paid for or reimbursed by such employer shall be taken to be the value of perquisite chargeable to tax as reduced by the amount, if any paid or recovered from the employee for such benefit or amenity:

Provided that there shall be no value of such benefit where expenses are incurred wholly and exclusively for official purposes and the following conditions are fulfilled:

Membership of Clubs

The value of benefit to the employee resulting from the payment or reimbursement by the employer of any expenditure incurred (including the amount of annual or periodical fee) in a club by him or by an member of his household shall be determined to be the actual amount of expenditure incurred or reimbursed by such employer on that account. The amount so determined shall be reduced by the amount, if any paid or recovered from the employee for such benefit or amenity:

Provided that where the employer has obtained corporate membership of the club and the facility is enjoyed by the employee or any member of his household, the value of perquisite shall not include the initial fee paid for acquiring such corporate membership.

Nothing contained in this clause shall apply if such expenditure is incurred wholly and exclusively for business purposes and the following conditions are fulfilled:-

Nothing contained in this clause shall apply for use of health club, sports and similar facilities provided uniformly to all employees by the employer.

Use of Movable Assets

The value of benefit to the employee resulting from the use by the employee or any member of his household of any movable asset (other than assets already specified in this rule and other than laptops and computers) belonging to the employer or hired by him shall be determined at 10% per annum of the actual cost of such asset or the amount of rent or charge paid or payable by the employer, as the case may be, as reduced by the amount, if any, paid or recovered from the employee for such use.

Transfer of Movable Assets

The value of benefit to the employee resulting from the use by him or any member of his household of any movable asset (other than assets already specified in Rule 3 and other than laptops and computers) belonging to the employer or hired by him shall be determined at 10% per annum of the actual cost of such asset or the amount of rent or charge paid or payable by the employer, as the case may be, as reduced by the amount, if any, paid or recovered from the employee for such use.

The value of benefit to the employee arising from the transfer of any movable asset belonging to the employer directly or indirectly to the employee or any member of his household shall be determined to be the amount representing the actual cost of such asset to the employer as reduced by the cost of normal wear and tear calculated at the rate of 10% of such cost for each completed year during which such asset was put to use by the employer and as further reduced by the amount, if any, paid or recovered from the employee being the consideration for such transfer:

Provided that in the case of computers and electronic items, the normal wear and tear would be calculated at the rate of 50% and in the case of motor cars at the rate of 20% by the reducing balance method.

Any Other Benefit or Amenity, Service, Right or Privilege

The value of any other benefit or amenity, service, right or privilege provided by the employer shall be determined on the basis of cost to the employer under an arms length transaction as reduced by the employees contribution, if any:

Provided that nothing contained in this clause shall apply to the expenses on telephones including a mobile phone actually incurred on behalf of the employee by the employer.

Perquisites Exempt from Income Tax

Some instances of perquisites exempt from tax are given below: Provision of medical facilities {Proviso to Sec. 17(2)]:

Value of medical treatment in any hospital maintained by the Government or any local authority or by the employer or approved by the employer or approved by the Chief Commissioner of Income-tax. Besides, any sum paid by the employer towards medical reimbursement other than as discussed above is exempt upto Rs. 15,000/-.

No perquisite shall arise if interest free/concessional loans are made available for medical treatment of specified diseases in Rule 3A or where the loan is petty not exceeding in the aggregate Rs. 20,000/-

No perquisite shall arise in relation to expenses on telephones including a mobile phone incurred on behalf of the employee by the employer.

Rent free official residence provided to a judge of High Court or Supreme Court or an Officer of parliament, Union Minister or Leader of Opposition.

Perquisites allowed outside India by the Government to a citizen of India for rendering services outside India (Sec. 10(7))

Explanations:

For the purposes of this rule-

Disclaimer:

All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may visit the web site of Income Tax Department for resolving their doubts or for clarifications.