Taxability of Perquisites Under Income Tax

Tax­a­bil­i­ty of Dif­fer­ent Perquisites paid to Employ­ees by Employ­ers in the hand of Employ­ee for the finan­cial year 2018–19 under Income Tax. Sec­tion wise details has been giv­en in tab­u­lar For­mat.

17(2)(i)/(ii) read with Rule 3(1) Rent free unfur­nished accom­mo­da­tion pro­vid­ed to Cen­tral and State Gov­ern­ment employ­ees License Fees deter­mined in accor­dance with rules framed by Gov­ern­ment for allot­ment of hous­es shall be deemed to be the tax­able val­ue of perquisites.
17(2)(i)/(ii) read with Rule 3(1) Unfur­nished rent free accom­mo­da­tion pro­vid­ed to oth­er employ­ees Tax­able val­ue of perquisites A. If House Prop­er­ty is owned by the employ­er: i. 15% of salary, if pop­u­la­tion of city where accom­mo­da­tion is pro­vid­ed exceeds 25 lakhs as per 2001 cen­sus ii. 10% of salary, if pop­u­la­tion of city where accom­mo­da­tion is pro­vid­ed exceeds 10 lakhs but does not exceed 25 lakhs as per 2001 cen­sus iii. 7.5% of salary, if accom­mo­da­tion is pro­vid­ed in any oth­er city B. If House Prop­er­ty is tak­en on lease or rent by the employ­er, the perquisite val­ue shall be : i. Lease rent paid or payable by the employ­er or 15% of the salary, whichev­er is low­er *Salary includes: a) Basic Pay b) Dear­ness Allowance (only to the extent it forms part of retire­ment ben­e­fit salary) c) Bonus d) Com­mis­sion e) All oth­er allowances (only tax­able por­tion) f) Any mon­e­tary pay­ment which is charge­able to tax But does not include i. Val­ue of any perquisite [under sec­tion 17(2)] ii. Employer’s con­tri­bu­tion to PF iii. Ben­e­fits received at the time of retire­ment like gra­tu­ity, pen­sion etc. Note: 1) Rent free accom­mo­da­tion is not charge­able to tax if pro­vid­ed to an employ­ee work­ing at min­ing site or an on-shore oil explo­ration site, etc.,— (i) which is being of tem­po­rary nature (sub­ject to con­di­tions) (ii) which is locat­ed in remote area. 2) Rent free accom­mo­da­tion if pro­vid­ed to High Court or Supreme Court Judges, Union Min­is­ters, Leader of Oppo­si­tion in Par­lia­ment, an offi­cial in Par­lia­ment and Serv­ing Chair­man and mem­bers of UPSC is Tax Free Perquisites. 3) The val­ue so deter­mined shall be reduced by the amount of rent, if any, paid by the employ­ee. 4) If employ­ee is trans­ferred and retain prop­er­ty at both the places, the tax­able val­ue of perquisites for ini­tial peri­od of 90 days shall be deter­mined with ref­er­ence to only one accom­mo­da­tion (at the option of the assessee). The oth­er one will be tax free. How­ev­er after 90 days, tax­able val­ue of perquisites shall be charged with ref­er­ence to both the accom­mo­da­tions.
17(2)(i)/(ii) read with Rule 3(1) Rent free fur­nished accom­mo­da­tion Tax­able val­ue of perquisites a) Find out tax­able val­ue of perquisite assum­ing accom­mo­da­tion to be pro­vid­ed to the employ­ee is unfur­nished b) Add: 10% of orig­i­nal cost of fur­ni­ture and fix­tures (if these are owned by the employ­er) or actu­al high­er charges paid or payable (if these are tak­en on rent by the employ­er). Note: The val­ue so deter­mined shall be reduced by the amount of rent, if any, paid by the employ­ee
17(2)(i)/(ii) read with Rule 3(1) A fur­nished accom­mo­da­tion in a Hotel Tax­able val­ue of perquisites Val­ue of perquisite shall be low­er of fol­low­ing: a) Actu­al charges paid or payable by the employ­er to such hotel b) 24% of salary Note: Hotel accom­mo­da­tion will not be charge­able to tax if : a) It is pro­vid­ed for a total peri­od not exceed­ing in aggre­gate 15 days in the finan­cial year; and b) Such accom­mo­da­tion in hotel is pro­vid­ed on employee’s trans­fer from one place to anoth­er place.
17(2)(iv) Any sum paid by employ­er in respect of any oblig­a­tion of an employ­ee Ful­ly Tax­able
17(2)(viii) read with Rule 3(3) Ser­vices of a domes­tic ser­vant includ­ing sweep­er, gar­den­er, watch­men or per­son­al atten­dant (Tax­able in case of spec­i­fied employ­ee only [See Note 4]) Tax­able val­ue of perquisite shall be salary paid or payable by the employ­er for such ser­vices lessany amount recov­ered from the employ­ee.
17(2)(viii) read with Rule 3(4) Sup­ply of gas, elec­tric­i­ty or water for house­hold pur­pos­es Tax­able val­ue of perquisites: 1. Man­u­fac­tur­ing cost per unit incurred by the employ­er., if pro­vid­ed from resources owned by the employ­er; 2. Amount paid by the employ­er, if pur­chased by the employ­er from out­side agency Note:  i.  Any amount recov­ered from the employ­ee shall be deduct­ed from the tax­able val­ue of perquisite.  ii.  Tax­able in case of spec­i­fied employ­ees only [See note 4]
17(2)(viii) read with Rule 3(6) Trans­port facil­i­ties pro­vid­ed by the employ­er engaged in car­riage of pas­sen­ger or goods (except Air­lines or Rail­ways) (Tax­able in case of spec­i­fied employ­ee only [See Note 4]) Val­ue at which ser­vices are offered by the employ­er to the pub­lic less amount recov­ered from the employ­ee shall be a tax­able perquisite
17(2)(v) Amount payable by the employ­er to effect an insur­ance on life of employ­ee or to effect a con­tract for an annu­ity Ful­ly Tax­able
17(2)(vi) read with Rule 3(8)/3(9) ESOP/ Sweat Equi­ty Shares Tax­able val­ue of perquisites Fair Mar­ket val­ue of shares or secu­ri­ties on the date of exer­cise of option by the assessee lessamount recov­ered from the employ­ee in respect of such shares shall be the tax­able val­ue of perquisites. Fair Mar­ket Val­ue shall be deter­mined as fol­lows:  a) In case of list­ed Shares: Aver­age of open­ing and clos­ing price as on date of exer­cise of option (Sub­ject to cer­tain con­di­tions and cir­cum­stances)  b) In case of unlist­ed shares/ secu­ri­ty oth­er than equi­ty shares: Val­ue deter­mined by a Mer­chant Banker as on date of exer­cise of option or an ear­li­er date, not being a date which is more than 180 days ear­li­er than the date of exer­cise of the option.
17(2)(vii) Employer’s con­tri­bu­tion towards super­an­nu­a­tion fund Tax­able in the hands of employ­ee to the extent such con­tri­bu­tion exceed Rs.1,50,000
17(2)(viii) read with Rule 3(7)(i) Inter­est free loan or Loan at con­ces­sion­al rate of inter­est Inter­est free loan or loan at con­ces­sion­al rate of inter­est giv­en by an employ­er to the employ­ee (or any mem­ber of his house­hold) is a perquisite charge­able to tax in the hands of all employ­ees on fol­low­ing basis:  1. Find out the ‘max­i­mum out­stand­ing month­ly bal­ance’ (i.e. the aggre­gate out­stand­ing bal­ance for each loan as on the last day of each month);  2. Find out rate of inter­est charged by the SBI as on the first day of rel­e­vant pre­vi­ous year in respect of loan for the same pur­pose advanced by it;  3. Cal­cu­late inter­est for each month of the pre­vi­ous year on the out­stand­ing amount (men­tioned in point 1) at the rate of inter­est (giv­en in point 2)  4. Inter­est actu­al­ly recov­ered, if any, from employ­ee  5. The bal­ance amount (point 3-point 4) is tax­able val­ue of perquisite Noth­ing is tax­able if:  a) Loan in aggre­gate does not exceed Rs 20,000  b) Loan is pro­vid­ed for treat­ment of spec­i­fied dis­eases (Rule 3A) like neu­ro­log­i­cal dis­eases, Can­cer, AIDS, Chron­ic renal fail­ure, Hemo­phil­ia (spec­i­fied dis­eases). How­ev­er, exemp­tion is not applic­a­ble to so much of the loan as has been reim­bursed to the employ­ee under any med­ical insur­ance scheme.
17(2)(viii) read with Rule 3(7)(ii) Facil­i­ty of trav­el­ling, tour­ing and accom­mo­da­tion availed of by the employ­ee or any mem­ber of his house­hold for any hol­i­day a) Perquisite val­ue tax­able in the hands of employ­ee shall be expen­di­ture incurred by the employ­er less amount recov­ered from employ­ee. b) 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 less amount recov­ered from employ­ee.
17(2)(viii) read with Rule 3(7)(iii) Free food and bev­er­ages pro­vid­ed to the employ­ee 1) Ful­ly Tax­able: Free meals in excess of Rs. 50 per meal less amount paid by the employ­ee shall be a tax­able perquisite 2) Exempt from tax: Fol­low­ing free meals shall be exempt from tax  a) Food and non-alco­holic bev­er­ages pro­vid­ed dur­ing work­ing hours in remote area or in an off­shore instal­la­tion;  b) Tea, Cof­fee or Non-Alco­holic bev­er­ages and Snacks dur­ing work­ing hours are tax free perquisites;  c) Food in office premis­es or through non-trans­fer­able paid vouch­ers usable only at eat­ing joints pro­vid­ed by an employ­er is not tax­able, if cost to the employ­er is Rs. 50(or less) per meal.
17(2)(viii) read with Rule 3(7)(iv) Gift or Vouch­er or Coupon on cer­e­mo­ni­al occa­sions or oth­er­wise pro­vid­ed to the employ­ee a) Gifts in cash or con­vert­ible into mon­ey (like gift cheque) are ful­ly tax­able b) Gift in kind up to Rs.5,000 in aggre­gate per annum would be exempt, beyond which it would be tax­able.
17(2)(viii) read with Rule 3(7)(v) Cred­it Card a) Expen­di­ture incurred by the employ­er in respect of cred­it card used by the employ­ee or any mem­ber of his house­hold less amount recov­ered from the employ­ee is a tax­able perquisite b) Expens­es incurred for offi­cial pur­pos­es shall not be a tax­able perquisite pro­vid­ed com­plete details in respect of such expen­di­ture are main­tained by the employ­er
17(2)(viii) read with Rule 3(7)(vi) Free Recreation/ Club Facil­i­ties a) Expen­di­ture incurred by the employ­er towards annu­al or peri­od­i­cal fee etc. (exclud­ing ini­tial fee to acquire cor­po­rate mem­ber­ship) less amount recov­ered from the employ­ee is a tax­able perquisite b) Expens­es incurred on club facil­i­ties for the offi­cial pur­pos­es are exempt from tax. c) Use of health club, sports and sim­i­lar facil­i­ties pro­vid­ed uni­form­ly to all employ­ees shall be exempt from tax.
17(2)(viii) read with Rule 3(7)(vii) Use of mov­able assets of the employ­er by the employ­ee is a tax­able perquisite Tax­able val­ue of perquisites a) Use of Lap­tops and Com­put­ers: Nil b) Mov­able asset oth­er than Lap­tops, com­put­ers and Motor Car*: 10% of orig­i­nal cost of the asset (if asset is owned by the employ­er) or actu­al high­er charges incurred by the employ­er (if asset is tak­en on rent) less amount recov­ered from employ­ee. *See Note 1 for com­pu­ta­tion of perquisite val­ue in case of use of the Motor Car
17(2)(viii) read with Rule 3(7)(viii) Trans­fer of mov­able assets by an employ­er to its employ­ee Tax­able val­ue of perquisites a) Com­put­ers, Lap­top and Elec­tron­ics items: Actu­al cost of asset less depre­ci­a­tion at 50% (using reduc­ing bal­ance method) for each com­plet­ed year of usage by employ­er less amount recov­ered from the employ­ee b) Motor Car: Actu­al cost of asset less depre­ci­a­tion at 20% (using reduc­ing bal­ance method) for each com­plet­ed year of usage by employ­er less amount recov­ered from the employ­ee c) Oth­er mov­able assets: Actu­al cost of asset less depre­ci­a­tion at 10% (on SLM basis) for each com­plet­ed year of usage by employ­er less amount recov­ered from the employ­ee.
17(2)(viii) read with Rule 3(7)(ix) Any oth­er ben­e­fit or ameni­ty extend­ed by employ­er to employ­ee Tax­able val­ue of perquisite shall be com­put­ed on the basis of cost to the employ­er (under an arm’s length trans­ac­tion) less amount recov­ered from the employ­ee. How­ev­er expens­es on tele­phones includ­ing a mobile phone incurred by the employ­er on behalf of employ­ee shall not be treat­ed as tax­able perquisite.
10(10CC) Tax paid by the employ­er on perquisites (not pro­vid­ed for by way of mon­e­tary pay­ments) giv­en to employ­ee Ful­ly exempt
10(5) Leave Trav­el Con­ces­sion or Assis­tance (LTC/LTA), extend­ed by an employ­er to an employ­ee for going any­where in India along with his fam­i­ly* *Fam­i­ly includes spouse, chil­dren and depen­dent brother/sister/parents. How­ev­er, fam­i­ly doesn’t include more than 2 chil­dren of an Indi­vid­ual born on or after 01-10-1998. The exemp­tion shall be lim­it­ed to fare for going any­where in India along with fam­i­ly twice in a block of four years: i. Exemp­tion lim­it where jour­ney is per­formed by Air — Air fare of econ­o­my class in the Nation­al Car­ri­er by the short­est route or the amount spent, whichev­er is less ii. Exemp­tion lim­it where jour­ney is per­formed by Rail — Air-con­di­tioned first class rail fare by the short­est route or the amount spent, whichev­er is less iii. Exemp­tion lim­it if places of ori­gin of jour­ney and des­ti­na­tion are con­nect­ed by rail but the jour­ney is per­formed by any oth­er mode of trans­port — Air-con­di­tioned first class rail fare by the short­est route or the amount spent, whichev­er is less iv. Exemp­tion lim­it where the places of ori­gin of jour­ney and des­ti­na­tion are not con­nect­ed by rail: a. Where a rec­og­nized pub­lic trans­port sys­tem exists — First Class or deluxe class fare by the short­est route or the amount spent, whichev­er is less b. Where no rec­og­nized pub­lic trans­port sys­tem exists — Air con­di­tioned first class rail fare by short­est route or the amount spent, whichev­er is less Notes: i. Two jour­neys in a block of 4 cal­en­dar years is exempt ii. Tax­able only in case of Spec­i­fied Employ­ees [See note 4]
Pro­vi­so to sec­tion 17(2) Med­ical facil­i­ties in India 1) Expense incurred or reim­bursed by the employ­er for the med­ical treat­ment of the employ­ee or his fam­i­ly (spouse and chil­dren, depen­dent — par­ents, broth­ers and sis­ters) in any of the fol­low­ing hos­pi­tal is not charge­able to tax in the hands of the employ­ee: a)  Hos­pi­tal main­tained by the employ­er. b)  Hos­pi­tal main­tained by the Gov­ern­ment or Local Author­i­ty or any oth­er hos­pi­tal approved by Cen­tral Gov­ern­ment c)  Hos­pi­tal approved by the Chief Com­mis­sion­er hav­ing regard to the pre­scribed guide­lines for treat­ment of the pre­scribed dis­eases. 2) Med­ical insur­ance pre­mi­um paid or reim­bursed by the employ­er is not charge­able to tax.
Pro­vi­so to sec­tion 17(2) Med­ical facil­i­ties out­side India Any expen­di­ture incurred or reim­bursed by the employ­er for med­ical treat­ment of the employ­ee or his fam­i­ly mem­ber out­side India is exempt to the extent of fol­low­ing (sub­ject to cer­tain con­di­tion): a) Expens­es on med­ical treat­ment — exempt to the extent per­mit­ted by RBI. b) Expens­es on stay abroad for patient and one atten­dant — exempt to the extent per­mit­ted by RBI. c) Cost on trav­el of the employ­ee or any fam­i­ly or one atten­dant — exempt, if Gross Total Income (before includ­ing the trav­el expen­di­ture) of the employ­ee, does not exceed Rs. 2,00,000.

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