Tax Treatment of ‘ Benefits & Facilities gets by the Salaried Employees’

1.

Miscellaneous Benefits

2.

Motor Car  Facilities

3.

Educational  Facilities

4.

Other Educational Facilities

5.

Employees Provident Fund

6.

Arrear of Salary and relief under section 89(1)

1.      Miscellaneous Benefits

 

1.

-

Lump-sum payment made gratuitously or by way of compensation or otherwise to widow or other legal heirs of an employee who dies while still in active service [Circular No. 573, dated 21-08-1990]

Fully exempt in the hands of widow or other legal heirs of employee

2.

-

Ex-gratia payment to a person (or legal heirs) by Central or State Government, Local Authority or Public Sector Undertaking consequent upon injury to the person or death of family member while on duty [Circular No. 776, dated 08-06-1999]

Fully exempt in the hands of individual or legal heirs

3.

-

Salary received from United Nation Organization [Circular No. 293, dated 10-02-1981]

Fully exempt

4.

10(6)(ii)

Salary received by foreign national as an officials of an embassy, high commission, legation, consulate or trade representation of a foreign state

Fully exempt if corresponding official in that foreign country enjoys a similar exemption

5.

10(6)(vi)

Remuneration received by non-resident foreign citizen as an employee of a foreign enterprise for services rendered in India, if:

 a)  Foreign enterprise is not engaged in any trade or business in India

 b)  His stay in India does not exceed in aggregate a period of 90 days in such previous year

 c)  Such remuneration is not liable to deducted from the income of employer chargeable under this Act

Fully exempt

6.

10(6)(viii)

Salary received by a non-resident foreign national for services rendered in connection with his employment on a foreign ship if his total stay in India does not exceed 90 days in the previous year.

Fully exempt

7.

-

Salary and allowances received by a teacher /professor from SAARC member state (Subject to certain conditions).

Fully exempt

 

2.      Motor Car  Facilities

Notes:

1. Motor Car (taxable only in case of specified employees [See note 4] except when car owned by the employee is used by him or members of his household wholly for personal purposes and for which reimbursement is made by the employer)

 

S. No.

Circumstances

Engine Capacity up to 1600 cc

Engine Capacity above 1600 cc

1

Motor Car is owned or hired by the employer

1.1

Where maintenances and running expenses including remuneration of the chauffeur are met or reimbursed by the employer.

1.1-A

Used wholly and exclusively in the performance of official duties.

Fully exempt subject to maintenance of specified documents

Fully exempt subject to maintenance of specified documents

1.1-B

Used exclusively for the personal purposes of the employee or any member of his household.

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 at 10% per annum of the cost of vehicle less any amount charged from the employee for such use is taxable value of perquisite.

1.1-C

The motor car is used partly in the performance of duties and partly for personal purposes of the employee or any member of his household.

Rs. 1,800 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Rs. 2,400 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Nothing is deductible in respect of any amount recovered from the employee.

1.2

Where maintenances and running expenses are met by the employee.

1.2-A

Used wholly and exclusively in the performance of official duties.

Not a perquisite, hence, not taxable

Not a perquisite, hence, not taxable

1.2-B

Used exclusively for the personal purposes of the employee or any member of his household

Expenditure incurred by the employer (i.e. hire charges, if car is on rent or normal wear and tear at 10% of actual cost of the car, if car is owned by the employer) plus salary of chauffeur if paid or payable by the employer minus amount recovered from the employee.

1.2-C

The motor car is used partly in the performance of duties and partly for personal purposes of the employee or any member of his household

Rs. 600 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Rs. 900 per month (plus Rs. 900 per month, if chauffeur is also provided to run the motor car) shall be taxable value of perquisite

Nothing is deductible in respect of any amount recovered from the employee.

2

Motor Car is owned by the employee

2.1

Where maintenances and running expenses including remuneration of the chauffeur are met or reimbursed by the employer.

2.1-A

The reimbursement is for the use of the vehicle wholly and exclusively for official purposes

Fully exempt subject to maintenance of specified documents

Fully exempt subject to maintenance of specified documents

2.1-B

The reimbursement is for the use of the vehicle exclusively for the personal purposes of the employee or any member of his household (taxable in case of specified employee as well as non-specified employee)

Actual expenditure incurred by the employer minus amount recovered from the employee

2.1-C

The reimbursement is for the use of the vehicle partly for official purposes and partly for personal purposes of the employee or any member of his household.

Actual expenditure incurred by the employer minus Rs. 1800 per month and Rs. 900 per month if chauffer is also provided minus amount recovered from employee shall be taxable value of perquisite.

Actual expenditure incurred by the employer minus Rs. 2400 per month and Rs. 900 per month if chauffer is also provided minus amount recovered from employee shall be taxable value of perquisite.

3

Where the employee owns any other automotive conveyance and actual running and maintenance charges are met or reimbursed by the employer

3.1

Reimbursement for the use of the vehicle wholly and exclusively for official purposes;

Fully exempt subject to maintenance of specified documents

Fully exempt subject to maintenance of specified documents

3.2

Reimbursement for the use of vehicle partly for official purposes and partly for personal purposes of the employee.

Actual expenditure incurred by the employer as reduced by Rs. 900 per month

Not Applicable

 

3.      Educational  Facilities

Taxable only in the hands of specified employees [See note 4]

 

Facility extended to

Value of perquisite

Provided in the school owned by the employer

Provided in any other school

Children

Cost of such education in similar school less Rs. 1,000 per month per child (irrespective of numbers of children) less amount recovered from employee

Amount incurred less amount recovered from employee (an exemption of Rs. 1,000 per month per child is allowed)

Other family member

Cost of such education in similar school less amount recovered from employee

Cost of such education incurred

 

4.      Other Educational Facilities

 

Particulars

Taxable Value of Perquisites

Reimbursement of school fees of children or family member of employees

Fully taxable

Free educational facilities/ training of employees

Fully exempt

 

5.      Employees Provident Fund

Tax treatment in respect of contributions made to and payment from various provident funds are summarized in the table given below:

 

Particulars

Statutory provident fund

Recognized provident fund

Unrecognized provident fund

Public provident fund

Employers contribution to provident fund

Fully Exempt

Exempt only to the extent of 12% of salary*

Fully Exempt

-

Deduction under section 80C on employees contribution

Available

Available

Not Available

Available

Interest credited to provident fund

Fully Exempt

Exempt only to the extent rate of interest does not exceed 9.5%

Fully Exempt

Fully Exempt

Payment received at the time of retirement or termination of service

Fully Exempt

Fully Exempt (Subject to certain conditions and circumstances)

Fully Taxable (except employee’s contribution)

Fully Exempt

 

* Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits) + turnover based commission

Payment from recognized provident fund shall be exempt in the hands of employees in following circumstances:

a) If employee has rendered continue service with his employer (including previous employer, when PF account is transferred to current employer) for a period of 5 years or more

b) If employee has been terminated because of certain reasons which are beyond his control (ill health, discontinuation of business of employer, etc.)

 

4. Specified Employee

The following employees are deemed as specified employees:

 1) A director-employee

 2) An employee who has substantial interest (i.e. beneficial owner of equity shares carrying 20% or more voting power) in the employer-company

 3) An employee whose monetary income* under the salary exceeds Rs.50,000

*Monetary Income means Income chargeable under the salary but excluding perquisite value of all non-monetary perquisites

6. Arrear of Salary and relief under section 89(1)

1.

15

Arrear of salary and advance salary

Taxable in the year of receipt. However relief under section 89 is available

2.

89

Relief under Section 89

If an individual receives any portion of his salary in arrears or in advance or receives profits in lieu of salary, he can claim relief as per provisions of section 89 read with rule 21A

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