Perquisite may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. It also denotes something that benefits a man by going into his own pocket. Perquisites may be provided in cash or in kind. However, perquisites are taxable under the head “Salaries” only if they are
- allowed by an employer to his employee;
- allowed during the continuance of employment;
- directly dependent upon service;
- resulting in the nature of personal advantage to the employee; and
- derived by virtue of employer’s authority.
It is not necessary that a recurring and regular receipt alone is a perquisite. Even a casual and non-recurring receipt can be perquisite if the aforesaid conditions are satisfied. The following propositions should also be kept in view:
- Perquisites are included in salary income only if they are received by an employee from his employer (maybe former, present or prospective). Perquisites, received from a person other than employer, are taxable under the head “Profits and gains of business or profession” or “Income from other sources”.
- A benefit or advantage would be taxable as perquisites only if it has a legal origin. As unauthorised advantage taken by an employee without his employer’s authority would create a legal obligation to restore such advantage, it would not amount to “perquisite” taxable under the Act. On the other hand, if the benefit has been conferred unilaterally without the aid of agreement between the parties, the employee can be taxed on the perquisites. It is not necessary that the benefit should have been received under an enforceable right.
Under the Act, the term “perquisites” is defined by section 17(2) as including the following items:
- the value of rent-free accommodation provided to the assessee by his employer [sec. 17(2)(i)];
- the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer [sec. 17(2)(ii)];
- the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases:
- by a company to an employee who is a director thereof;
- by a company to an employee, being a person who has substantial interest in the company;
- by any employer (including a company) to an employee to whom provisions of (i) and (ii) above 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 benefits, exceeds Rs. 50,000 [sec. 17(2)(iii)];
- any sum paid by the employer in respect of any obligation which but for such payment would have been payable by the assessee [sec. 17(2)(iv)];
- any sum payable by the employer, whether directly or through a fund other than a recognised provident fund or approved superannuation fund or a deposit-linked insurance fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity [sec. 17(2)(v)];
- 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 [sec. 17(2)(vi)];
- the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds Rs. 1,50,000 [sec. 17(2)(vii)]; and
- the value of any other fringe benefit or amenity as may be prescribed [sec. 17(2)(viii)].