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Meaning and Types of Perquisites [ Sec. 17(2)] for Calculating Salary Income


Meaning :

U/s 17(1) ‘Salary’ includes the value of any perquisite allowed or amenity provided by employer to employee. The world ‘perquisite’ has not been defined under Income-tax Act 1961. Perquisite simply means any casual emolument attached to an office. Oxford English Dictionary also defines perquisite as “any casual emolument, fee or profit attached to an office or position, in addition to salary or wages “. Perquisites may be given in a variety of forms. If the perquisite does not accrue to the employee it will not be taxable. [Barclays Bank Ltd. v. Naylor 39 (T. C.) 256]. They may be received in cash or in kind. For income-tax purposes it is immaterial whether the perquisites are paid voluntarily or under a contractual obligation.

Value of perquisites is chargeable to tax under the head salary only if these perks are received by an employee from his or her employer and employer may be a present, past or prospective one. In case any perk has been received from a person other than employer, then also the value of perk is taxable but either under the head ‘Business or Profession’ or ‘Income from other Sources’.

Any benefit derived by an employee from his employer whether received in lump-sum or is being received every month and if such benefit comes out of employment agreement and it is providing a personal benefit to the employee or his family members, value of such a benefit is chargeable to tax under the head salary.

Under section 17(2) perquisites are of the following types :

  1. the value of rent-free accommodation provided to the assessee by his employer [Sec. 17(2)(i)] ;

  2. the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer [Sec. 17(2)(ii)]

  3.  the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases

    1. by a company to an employee who is a director thereof;

    2. by a company to an employee being a person who has a substantial interest in the company;

    3. by any employer (including a company to an employee to whom the provisions of section 1 7(2)(iii)(a) and (b) do not apply and whose income under the head “Salaries “, exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds 50,000 [Sec. 17(2)(iii)]

“For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for purposes of this sub-clause.” (Explanation to Section 17(2)(iii)]

  1. any sum paid by the employer in respect at any obligation which, but , such payment would have been payable by the employee [Employee’s electricity bill paid by the employer] [Sec. 1 7(2)(iv)]

  2.  any sum payable by the employer, whether directly through a fund, other than a recognised provident fund or an approved superannuation fund to effect an assurance on the lU of the assessee or to effect a contract for an annuity [Sec. 1 7(2)(v)];

  3. 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 concessional rate to the assessee. [Section 1 7(2)(vi)]

  4. the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds 1,00,000; and [Section 17(2)(vii)]

  5. the value of any other fringe benefit or amenity as may be prescribed. [Section] 7(2)(viii)]


‘Provided’ that nothing in his clause shall apply to …

  1. the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;

  2. any sum paid by the employer in respect of any expenditure actually incured by the employee on his medical treatment or of any member of his family

  3. in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees

  4. in respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines
    Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital

  5. any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority (IRDA) for the purposes of clause (ib) of sub-section (1) of section 36

  6. any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government or the Insurance Regulatory and Development Authority (IRDA) for the purposes of section 80D;

  7. any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family [other than the treatment referred to in clauses (i) and (ii)]; so, however, that such sum does not exceed fifteen thousand rupees, in the previous year.

  8. any expenditure incurred by the employer on

  9. medical treatment of the employee, or any member of the family of such employee, outside India

  10. travel or stay abroad of the employee or any member of the family of such employee for medical treatment

  11. travel and stay abroad of one attendant who accompanies the patient in connection with such treatment.

subject to the condition that the expenditure on travel referred to in sub-clauses (2) and (3) of this clause shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed ` Two lakhs.

  1. any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause

Explanation : For the purposes of clause (2) :

  1. “hospital” includes a dispensary or a clinic; or a nursing home

  2. “family “, in relation to an individual, shall have the same meaning as in clause (5) of section 10 ; and

  3. “gross total income” shall have the same meaning as in clause (5) of section 80B;

The value of all perquisites is included in the total income of an employee under the head ‘Salary’.


More.. Topics ... @ ' SALARY'
Salary-Definition & Meaning

Computation of Salary Income

Definition of Word ‘Salary’ [ Section 17(1)]

Section-15 : List of Incomes Chargeable to Income Tax under the head ‘ SALARIES’

Important Points / Characteristics for Computing Salary Income

Provident Fund

Treatment of Provident Funds (PF) for Computing Salary Income

Taxable Portion of annual accretion to RPF [Section 17(1)(vii)]. for Computing Salary Income

Transferred Balance from URPF to RPF [Section 17(1)(vii] for Computing Salary Income

Refund from Provident Fund [Section 17(3)(ii)] for Computing Salary Income

New Pension Scheme [ NPS] for Central Government and other Employees joining new jobs on or after 1-1-2004 for Computing Salary Income

Allowance [ Section 17(3)]

Allowance [ Section 17(3)] – for Computing ‘Salary’ Income

Fully Exempted Allowances for Computing ‘Salary’ Income

Fully Taxable Allowances for Computing ‘Salary’ Income

House Rent Allowance (HRA) for Computing ‘Salary’ Income

Allowances covered u/s 10 (14) for Computing ‘Salary’ Income

Meaning Of Salary For Different Purposes
PERQUISITES [Section 17(2)]

Meaning and Types of Perquisites [ Section 17(2)]

Taxability of Perquisites for Computing Salary Income

Perks Exempted From Tax for all Employees and not added in Salary Income

Rent Free House [Section 17(2)(i) Rule 3(1)]

Rules Regarding Calculation Of Value Of Rent Free House

Valuation Of Rent Free Accomodation (Unfurnished & Furnished)

Valuation of Rent Free Accommodation Provided as Concessional Rent [Sec. 17(2)ii)]

Obligation of Employee of Rent Free House met by Employer [Section 17(2)(iv)]

Sum payable by the Employer directly or through a fund to effect an assurance / an annuity [Section 17(2)(v)]

Any specified security or sweat equity shares allotted or transferred to employee [Section 17(2)(vi)] [ w.e.f. 1-4-2009]

Contribution to an Approved Superannuation Fund by the Employer [Sec. 17(2)(vii)]

Interest free or Concessional loan from employer [Rule 3(7)(i)]

Valuation of Perk in respect of Travelling, Touring, Accommodation

Food or Beverages Facility by Employer to Employee

Valuation of Perquisite in respect of Gift Voucher or Token

Valuation of Perquisite in respect of Credit Card

Valuation of Perquisite in respect of Club Facility

Use of Moveable Assets by Employer to Employee

Transfer Of Moveable Assets to the employee

Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii) Rule 3]

Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)]

Perquisite of Free domestic servants [Rule 3(3)]

Perquisite in respect of free supply of gas, electric energy, water supply [Rule 3(4)]

Free Educational Facilities to Children of Employee’s Household [Rule 3(5)]

Facility of Free or Concessional Private Journey to an employee by the employer engaged in the carriage of passengers or goods [Rule 3(6)]

Receipts treated as Profit in Lieu of Salary [ Section 17(3)]

Leave Travel Concessional (LTC) Assistance [Section 10(5)]

Death-Cum-Retirement Gratuity [Section 10(10)]

Non-Government employees receiving gratuity under payment of Gratuity Act, 1972 [POGA]

Non-Government Employees receiving gratuity (Not covered under payment of Gratuity Act)

PENSION [Monthly and Commuted] for Computing Salary Income

Leave Encashment [Section 10(10AA)] for Computing Salary Income

Any amount received as compensation on termination of employment [Section-10B]

Any amount received on voluntary retirement [Section 10(10C)]

Payment received from Recognised Provident Fund [Section 10(12)]

Any payment from Superannuation Fund [Section 10(13)]


Entertainment Allowance to Government Employees [Section-16(ii)]

Tax on Employment Under Section - 16(iii)


Section - 80C : Deductions from Gross Total Income (GTI) in case of Individual and HUF

Qualifying Amount ( Q.A.) for Deduction U/s 80C

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