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Types of Perquisites Under Income Tax and Its Taxability


What is Perquisite

“Perquisite” is defined in the section 17(2) of the Income tax Act as including:

(i) Rent-Free or Concessional Accommodation - Value of rent-free/accommodation provided by the employer.

(ii) Payment on Behalf of Employee - Any sum paid by the employer in respect of an obligation which was payable by the assessee.

(iii) Any Benefit at concessional rate - Value of any benefit/amenity granted free or at concessional rate to specified employees etc.

(iv) ESOPS - The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at a concessional rate to the assesse.

(v) Contribution to any fund on behalf of the employee - Any sum payable by the employer, whether directly or through a fund other than a recognized provident fund or an approved superannuation fund to effect an assurance on the life of the assessee or to effect a contract for an annuity.

(vi) More than 7.5 Lakh in PF/NPS/Superannuation Fund : The amount of any contribution to an approved Recognized Profit Fund / NPS / Superannuation fund by the employer in respect of the assessee, to the extent it exceeds seven lakh fifty thousand rupees; and

(vii) Any other Benefit - The value of any other fringe benefit or amenity as may be prescribed.


Types of Perquisites

Defination of perquisites is inclusive in nature i.e can include anyother benefits given to employees not mentioned in defination. Perquisites can be categorized in three types -

  1. Perquisites Taxable in all Cases

  2. Tax Free Perquisites

  3. Perquisites taxable only in hands of specified employees


Perquisites falling in each category are as follows :


Perquisites Taxable in all Cases

  • Rent Free Accomodation

  • Concession in Rent

  • Payment by Employer on Behalf of Employee

  • Payment by Employer for Life Insurance of Employee

  • ESOPS / Sweat Equity Shares

  • Value of anyother fringe benefits - interest free /concessional loan, gifts , vouchers , paying credit card expenses , use of movable or immovable properties


Tax Free Perquisites

  • Telephone Expense of Employee Residence

  • Transport Facility

  • Employers Contribution to Group Insurance Scheme / Accident Policy

  • Lunch expenses not exceeding Rs 50 per day

  • Recreational activities like club facilities for all employees and not for any specific employees

  • Traing of employees including its lodging and boarding expenses

  • Medical expenditure for employees as per limits specificed

  • Expenses incurred by employee for official purposes


Perquisites Taxable Only in Hands of Specified Employees

Any free or concessional benefits provided relating to below :

  • Sweeper , Gardener, Watchman or Personal Attendant,

  • Facility to use water , gas , electricity supplied by employer

  • Use of Motor Car for personal purpose

  • Free of Concessional Educational facilities to employee or its family


Specified employee is an employee who is either a director or having substantial interest in company (i.e more than 20%) or whose annual taxable salary income is more than Rs. 50,000.


Note : Limit of Rs 50,000 is of annual taxable salary and thus exclude all exempt allowance and standard deductions


For in detail valuation for each type of perquisite , stay tune with us in upcoming articles.


Meanwhile you can also read about recommend salary structure and exempt allowance here or Read About the Hosue Rent Allowance or Read About the Old Regime V/s New Regime or Read About the Form 12BB

 

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