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Perquisites of Specified Fringe Benefits or Amenities in the hands of all Employees for computing Salary Income under Income Tax Act.

Fringe benefits or amenities which shall be taxable perquisite in the hands of all employees 

 

The rules for valuation of specified fringe benefits or amenities are as under: 

 

1.   Interest Free or Concessional Loans [Rule 3(7)(i)] – Its Valuation for computing Salary income 

 

The value of the benefit resulting from loans 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. 

 

The above interest has to be calculated 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, in the following cases, if such loans are made available to an employee or any member  of his household, no value would be charged: 

 

(a)           where the amount of loans are petty not exceeding in the aggregate ₹20,000; or 

 

(b)          where the loan is for medical treatment in respect of diseases specified in rule 3A. However,  in this case, 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. 

 

Note :

 

1.            "Maximum outstanding monthly balance" means the aggregate outstanding balance for each loan as on the  last day of each month. 

 

2.            "Member of household" shall include: 

(a) spouse(s); 

(b) children and their spouses; 

(c) parents; 

(d) servants and dependents.

 

 

 

2.   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 [Rule 3(7)(ii)]  – Its Valuation for computing Salary income

 

The value of the benefit will be as under:— 

 

Circumstances

Value of benefit or amenity 

(a) (i) Where such facility is maintained by the  employer, and is not available uniformly to all  employees. 

 

(ii) Where such facility is available uniformly to  all employees 

(i) It will be the value at which such facilities  are offered by other agencies to the public. 

 

 

(ii) Amount actually incurred by the employer

(b) 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 by the  employer in respect of such member of  household.

(c) Where any official tour is extended as a  vacation.

The value will be limited to the expenses  incurred by the employer in relation to such  extended period of stay or vacation of the  employee

(d) In any other case, where such facility is given to  the employee or any member of his household.

A sum equal to the amount of expenditure  incurred by the employer.

 

However, in the all above cases, the amount determined above shall be reduced by the amount, if  any paid or recovered from the employee for such benefit or amenity. 

 

The above rules shall not be applicable to any leave travel concession or assistance referred to in rule 2B. 

 

3.   Value of Free Food and Non-alcoholic Beverages [Rule 3(7)(iii)]  – Its Valuation for computing Salary income

 

The value of free food, tea and snacks shall be as under:— 

 

Circumstances

Value of benefit

(a) Tea or snacks provided during working hours

Nil

(b) Free food and non-alcoholic beverages during  working hours provided in a: 

(i) remote area; or 

(ii) an offshore installation.

Nil

(c) Free food and non-alcoholic beverages  provided by the employer during working hours: 

(i) at office or business premises; or 

(ii) through paid vouchers which are not  transferable and usable only at eating  joints.

Nil, if the value thereof in either case is upto ₹50  per meal. 

 

Amount in excess of ₹50 per meal shall be the  value of such taxable perquisite

(d) In any other case

Actual amount of expenditure incurred by the  employer as reduced by the amount if any paid or  recovered from the employee for such benefit or  amenity.

 

It may be noted that as per Circular No. 15/2001, dated 12.11.2001 relating to TDS on salary not  only tea but similar non-alcoholic beverages and snacks in the form of light refreshment during  working hours are not charged as perquisite. 

(Working hours include overtime, working on holidays, etc. )

 

Further, as regards free meals, expenditure on provision of free meals by the employer in excess of  ₹50 should only be treated as perquisite, as reduced by recoveries made from the employee. 

 

4.   Value of any Gift, Voucher or Token [Rule 3(7)(iv)]  – Its Valuation for computing Salary income

 

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. 

 

However, where the value of such gift, voucher or token, as the case may be, is below ₹5,000 in  the aggregate during the previous year, the value of perquisite shall be taken as nil. 

 

5.   Expenses on Credit Cards [Rule 3(7)(v)]  – Its Valuation for computing Salary income

 

Circumstances

Value of benefit

(a) Where expenses including membership fees and annual fees are  incurred by the employee or any member of his household, which is  charged to a credit card (including any add-on-card), provided by the  employer or otherwise, are paid for or reimbursed by the employer and  such expenses are incurred for any purpose other than mentioned under  clause (b) below.

The amount paid for or  reimbursed by the employer.

(b) Where such expenses are incurred wholly and exclusively for  official purposes.

Nil,

Provided :

the conditions  specified below are fulfilled.

 

The amount determined in clause (a) above shall be reduced by the amount, if any paid or  recovered from the employee for such benefit or amenity. 

 

Specified conditions to be fulfilled to claim that expenses have been incurred wholly and exclusively  for official purposes:— 

 

(a)           complete details in respect of such expenditure is maintained by the employer which may,  inter alia, include the date of expenditure and the nature of expenditure; 

 

(b)          the employer gives a certificate for such expenditure to the effect that the same was incurred  wholly and exclusively for the performance of official duties. 

 

6.   Club Membership and Expenses incurred in a Club [Rule 3(7)(vi)]  – Its Valuation for computing Salary income

 

Circumstances

Value of benefit

(a) The payment or reimbursement by the employer of any expenditure  incurred (including the amount of annual or periodical fee) in a club by  the employee or by any member of his household for any purpose other  than mentioned in clause (b) below.

The actual amount of  expenditure incurred or  reimbursed by the  employer.

(b) Where such expenses are incurred wholly and exclusively for  official purposes.

Nil,

Provided :

the  conditions specified below  are fulfilled.

 

The amount determined in clause (a) shall be reduced by the amount, if any paid or recovered  from the employee for such benefit or amenity. 

 

Specified conditions to be fulfilled to claim that expenses have been incurred wholly and exclusively  for official purposes:— 

 

(a)           complete details in respect of such expenditure is maintained by the employer which may,  inter alia, include the date of expenditure, the nature of expenditure and its business  expediency; 

 

(b)          the employer gives a certificate for such expenditure to the effect that the same was incurred  wholly and exclusively for the performance of official duties.

Note :

 

1.            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. 

 

2.            There shall be no perquisite value for use of health club, sports and similar facilities provided uniformly  to all employees by the employer.  

 

3.            Although the conditions given above are similar to conditions applicable for credit cards, but in clause  (a) above words 'business expediency' have been included which are not there in case of benefit relating  to credit card. 

 

 

 

7.   Use of Moveable Assets [Rule 3(7)(vii)]  – Its Valuation for computing Salary income

 

The value of benefit to the employee resulting from the use by the employee or any member of his  household of any moveable asset belonging to the employer or hired by him shall be determined as  under: 

 

Circumstances

Value of benefit 

(a) Use of laptops and computers

Nil

(b) Moveable assets, other than— 

(i) laptops and computers; and  

(ii) assets already specified in the rules 

(i) 10% per annum of the actual cost of such asset, or 

(ii) the amount of rent or charge paid, or payable by the  employer  as the case may be.

 

The amount mentioned in clause (b) shall be reduced by the amount, if any, paid or recovered  from the employee for such use. 

 

8.   Transfer of any Moveable Assets [Rule 3(7)(viii)]  – Its Valuation for computing Salary income

 

The value of benefit to the employee arising from the transfer of any moveable asset belonging to  the employer directly or indirectly to the employee or any member of his household shall be  determined as under: 

 

Asset transferred

Value of benefit 

(a) Computers and  electronic items 

Actual cost of such asset to the employer as reduced by 50% of the cost to the  employer for each completed year during which such asset was put to use by the  employer, on the basis of reducing balance method.

(b) Motor cars

Actual cost of such asset to the employer as reduced by 20% of the cost to the  employer for each completed year during which such asset was put to use by the  employer, on the basis of reducing balance method.

(c) Any other asset

Actual cost of such asset to the employer as reduced by 10% of the cost to the  employer for each completed year during which such asset was put to use by the  employer, on the basis of straight line method.

 

The amount mentioned in clauses (a), (b) and (c) above shall be reduced by the amount, if any,  paid or recovered from the employee being the consideration for such transfer.

 

9.   Treatment of any other benefit, amenity, etc. provided by the employer [Rule 3(7)(ix)] – Its Valuation for computing Salary income 

 

Rule 3(7)(ix) is applicable to all employees. As per this rule: 

 

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 arm's length transaction as reduced  by the employee's contribution, if any. 

 

However, nothing contained in this item shall apply to the expenses on telephones including a  mobile phone actually incurred on behalf of the employee by the employer.

 

 

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