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Perquisies' & 'Income Tax - ( Taxable & Exempted)

39.

17(2)(i)

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.

40.

17(2)(i)/(ii)

read with

Rule 3(1)

Unfurnished rent free accommodation provided to other employees

Taxable value of perquisites

i. If house property is owned by the employer, the taxable value of perquisite shall be:

A. 15% of salary, if population of city where accommodation is provided exceeds 25 lakhs

B. 10% of salary, if population of city where accommodation is provided exceeds 10 lakhs but does not exceed 25 lakhs

C. 7.5% of salary, if accommodation is provided in any other city

ii. If house property is taken on lease or rent by the employer, the taxable value of perquisite 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

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 in remote area.

 2) Rent free accommodation 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 perquisite.

 3) The value so determined shall be reduced by the amount of rent, if any,  recovered from 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.

41.

17(2)(i)

read with

Rule 3(1)

Rent free furnished accommodation

Taxable value of perquisites shall be computed in following manner:

a) 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).

c) Less: The value so determined shall be reduced by the amount of rent, if any, recovered from the employee

42.

17(2)(i)

read with

Rule 3(1)

Accommodation provided in a hotel

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.

Taxable value of perquisite shall be lower of following:

a)  Actual charges paid or payable by the employer to such hotel; or

b)  24% of salary

43.

17(2)(iii)

read with Rule 3(2)

Motor Car / Other Conveyance

Taxable value of perquisites (See Note 1 below)

44.

17(2)(iii)

read with Rule 3(3)

Services of a domestic servant including sweeper, gardener, watchmen or personal attendant (taxable only in case of specified employee [See Note 4])

Taxable value of perquisite shall be salary paid or payable by the employer for such services less any amount recovered from the employee.

45.

17(2)(iii)

read with Rule 3(4)

Supply of gas, electricity or water for household purposes

Taxable value of perquisites:

Manufacturing cost per unit incurred by the employer., if provided from resources owned by the employer;

Amount paid by the employer, if purchased by the employer from outside agency

Note:

1. Any amount recovered from the employee shall be deducted from the taxable value of perquisite.

2. Taxable in case of specified employees only [See note 4]

46.

17(2)(iii)

read with Rule 3(5)

Education Facilities

Taxable value of perquisites (See Note 2 below)

47.

17(2)(iii)

read with Rule 3(6)

Transport facilities provided by the employer engaged in carriage of passenger or goods (except Airlines or Railways)

Value at which services are offered by the employer to the public less amount recovered from the employee shall be a taxable perquisite

48.

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

49.

17(2)(vi) read with Rule 3(8)

ESOP/ Sweat Equity Shares

Fair Market value of shares or securities on the date of exercise of option by the assessee less amount 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.

50.

17(2)(vii)

Employer’s contribution towards superannuation fund

Taxable in the hands of employee to the extent such contribution exceeds Rs.1,50,000

51.

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 Step 1) at the rate of interest given in Step 2

 4) From the total interest calculated for the entire previous year (step 3), deduct interest actually recovered, if any, from employee

 5) The balance amount (Step 3-Step 4) is taxable value of perquisite

Nothing is taxable if:

a) Loan in aggregate does not exceed Rs. 20,000; or

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.

52.

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) Taxable value of perquisite 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.

53.

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.

54.

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.

55.

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

56.

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.

57.

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

58.

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.

59.

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.

60.

10(10CC)

Tax paid by the employer on perquisites (not provided for by way of monetary payments) given to employee

Fully exempt

61.

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.

(Subject to certain conditions)

The exemption shall be limited to fare for going anywhere in India along with family twice in a block of four years:

• Where journey is performed by Air - Exemption up to Air fare of economy class in the National Carrier by the shortest route

• Where journey is performed by Rail - Exemption up to air-conditioned first class rail fare by the shortest route

• If places of origin of journey and destination are connected by rail but the journey is performed by any other mode of transport - Exemption up to air-conditioned first class rail fare by the shortest route.

• Where the places of origin of journey and destination are not connected by rail:

* Where a recognized public transport system exists - Exemption up to first Class or deluxe class fare by the shortest route

* Where no recognized public transport system exists - Exemption up to air conditioned first class rail fare by shortest route.

Notes:

i. Two journeys in a block of 4 calendar years is exempt

ii. Taxable only in case of Specified Employees [See note 4]

62.

Proviso to section 17(2)

Medical facilities in India

 a)  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:

  i.  Hospital maintained by the employer.

  ii.  Hospital maintained by the Government or Local Authority or any other hospital approved by Central Government

  iii.  Hospital approved by the Chief Commissioner having regard to the prescribed guidelines for treatment of the prescribed diseases.

 b)  Medical insurance premium paid or reimbursed by the employer is not chargeable to tax.

 c)  Any other expenditure incurred or reimbursed by the employer for providing medical facility in India is not chargeable to tax up to Rs. 15,000 in aggregate per assessment year.

63.

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.  Expenditure incurred on travelling of patient and one attendant- exempt, if Gross Total Income (before including the travel expenditure) of the employee, does not exceed Rs. 2,00,000.

 

1.4.      “PERQUISITES”  &  INCOME TAX

Perquisites may be defined as any casual emolument or benefit attached to an office or position in addition to salary or  wages. It also denotes some thing that benefits a man by going into his own pocket ; it does not, however  cover mere reimbursement of necessary disbursements.

Perquisites can be divided  in the following 3 categories :

1.  Perquisites - Taxable in all cases.
2.  Perquisites – Exempted.
3.  Perquisites -  Taxable only in the hands of specified Employees.

TAXABLE-PERQUISITES

(Subject to Conditions)
Perquisites is a gain or profit incidentally made from employment in addition to regular salary or wages. Following are few perquisites which shall be taxable.

  1. Rent Free Accommodation

  2. Concessional Rent House

  3. Obligation of employee met by Employer. Amount paid by Employer regarding :

    1. Supply of Gas, Electricity & Water

    2. Free or Concessional Education Facilities of Children

    3. Income Tax of employee

    4. Professional Tax on employee

    5. Salary of servant employed by employee

    6. Motor Car or any other Conveyance for personal use of Employee

    7. Reimbursement of Medical Expenditure

  4. Any other Fringe benefits given by employer to employee :

    1. Free meals if provided by during working hours and value exceeds Rs.50 per day. Excess is taxable.

    2. Gifts exceeding Rs.5,000

    3. Club facilities actual expenditure is taxable.

    4. Credit Card and add on card-actual fee is taxable

    5. Interest free loans or loan at concessional rate of interest if more than Rs.20,000 and if not for medical treatment-difference between prescribed rate and rate charged is taxable.

    6. Use of movable assets except computers and laptops.

    7. Transfer of movable assets.

    8. Expense on tours and travels.

NON TAXABLE (EXEMPTED)- PERQUISITES

1)   Leave Travel Concession subject to conditions & actual spent only for travels.

2)   Computer/ Laptop provided for official / personal use.

  1. Initial Fees paid for corporate membership of a club.

  2. Refreshment provided by the Employer during working hours in
    office premises.

  3. Payment of annual premium on Personal Accident Policy.

  4. Subscription to periodicals and journal required for discharge of work.

  5. Provision of Medical Facilities.

  6. Gift not exceeding Rs. 5,000 p.a.

  7. Use of Health Club, Sports facility.

  8. Free telephones whether fixed or mobile phones.

  9. Interest Free / concessional loan of an amount not exceeding Rs.  20,000 (limit not application in the case of medical treatment)

  10. Contribution to recognized Provident Fund / approved super  annuation fund, pension or deferred annuity scheme & staff group insurance scheme.

  11. Free meal provided during working hours or through paid non transferable vouchers not exceeding Rs. 50 per meal or free meal provided during working hours in a remote area.

  12. The value of any benefit provided free or at a concessional rate (including goods sold at concessional rate) by a company to the Employees by way of allotment of shares etc., under the Employees stock  option plan as per Central Government Guidelines.

  13. Free Medical Facilities as given u/s 17(2)

  14. Free recreational facilities.

  15. Free education , training or refresher course for employees.

  16. Free ration received by member of armed force.

  17. Perquisites allowed by Govt. by its employees posted abroad.

  18. Rent free house given to office of Parliament, a Union Minister, and leader of Opposition in Parliament.

  19. Free Residence and Conveyance facilities to Judges of Supreme Court and High Court.

  20. Free Conveyance provided by employer to employee for going to or coming from palace of employment.

  21. Employers contribution to staff group insurance scheme.

  22. Tax on Perks paid by employer.

PERQUISITES -  TAXABLE ONLY IN THE HANDS OF SPECIFIED EMPLOYEES.

  1. Car owned by employer but used by employee both for personal and official purpose.

  2. Gas and Electricity facility.

  3. Education facility for children.

  4. Free Transport Allowance by employer engaged in Transport Business.

  5. Service of Domestic servant provided by employer.

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