Taxable & Non-Taxable Perquisites under 'Salary Income'

For Income-tax purposes, perquisites may be divided into five categories:

1. Perquisites which are taxable in the hands of all categories of employees.
2. Perquisites which are taxable only when the employee belongs to a specified group i.e. he is a specified employee.
3. Specified security or sweat equity shares allotted or transferred by the employer to the assessee.

4. Contribution by the employer to the approved superannuation fund in respect of assessee to the extent it exceeds Rs. 1,50,000.

5. Tax-free perquisites.

Perquisites which are Taxable in the hands of All Categories of Employees

The following perquisites are taxable in the hands of all employees:

1. Rent free accommodation provided by the employer to the employee. Such accommodation may be furnished or unfurnished.

2. Any concession in the matter of rent in respect of the accommodation provided or granted by the employer to the employee.

3. Any sum paid by the employer in discharging the monetary obligation of the employee which otherwise would have been payable by the employee e.g. the school fees of the children of the employee paid by the employer or the Income-tax of the employee paid by the employer.

4. Any sum payable by the employer whether directly or through a fund (other than recognized provident fund (RPF), Approved Superannuation Fund or Deposit Linked Insurance Fund) to effect an assurance on the life of the assessee or to effect a contract for an annuity.

5. The value of any other fringe benefit or amenity as may be prescribed.

Perquisites which are Taxable only in the case of Specified Employees .

All monetary obligations of the employee discharged by the employer are perquisites which are taxable in the hands of all employees. But sometimes the employer, instead of making the payment in respect of such monetary obligations or reimbursing such amount to the employee, provides the perquisite in the form of a facility to the employee. Such facility will be a perquisite only for specified employees mentioned in section 17(2)(iii). For example, if a watchman/sweeper is engaged by the employee and his wages are reimbursed/paid by the employer, it is a perquisite for all employees because it is the duty of the employee to pay the salary of his watchman/sweeper. On the other hand, if the watchman/sweeper is engaged by the employer and facility of his services is provided to the employee, it will be a perquisite only for specified employees. Similarly, if a motor car is provided by the employer to the employee for his personal use it shall be taxable perquisite in case of a specified employee only. Whereas if the car belongs to employee but expenses relating to personal use of such car are paid or reimbursed by the employer, it shall be a taxable perquisites in the hands of all employees, whether specified or not.

Any benefit/amenity in the form of a facility (other than rent free accommodation, concession in the matter of rent or fringe benefits or amenities as may be prescribed) provided by the employer, which is not tax-free, shall be taxable only in the hands of specified employees. Some of these are:

1. services of a sweeper, gardener, watchman or personal attendant,

2. free or concessional use of gas, electric energy and water for household consumption,

3. free or concessional educational facilities,

4. use of motor car,

5. personal or private journey provided free of cost or at concessional rate to an employee or member of his household,

6. the value of any other benefit or amenity, service, right or privilege provided by the employer.

If the above perquisites are provided in 'Money' (monetary terms) whether by way of reimbursement of expenses incurred by the employee for such facilities or by way of payment on behalf of employee, these perquisite shall be taxable in case of all employees e.g. if the school fees of the children of the employee is reimbursed to him or paid on his behalf to the school, such amount shall be perquisite in case of all employees. On the other hand if the children of the employee are studying in a school maintained by the employer, the education facility provided is not in money but in kind and it shall be perquisite only for specified employees. Similarly, if the personal gas bills of the employee are in the name of employee and the employer reimburses the amount of such gas bills to him or pays on his behalf to the gas agency, it is in monetary terms and taxable in case of all employees; on the other hand, if such bills are in the name of employer, it will be perquisite in case of specified employee only.

Non-Taxable Perquisites

• Leave travel concession subject to conditions & only actual amount spent.

• Comp / Laptop for official/personal use.

• Initial fees paid for corporate membership

• Refreshment provided during working hours in office premises.

• Payment of annual premium on personal accident policy.

• Subscription to periodicals and journals required for discharge of work.

• Provision of Medical Facilities.

• Gift not exceeding Rs. 5000 p.a.

• Use of health club, sports facility.

• Free telephones: fixed or mobiles.

• Interest free / concessional loan not exceeding Rs. 20,000 (limit not applicable for medical treatment).

• Children Education Allowance (Rs.100 p.m. per child — max. 2 children) &

• Hostel Allowance (Rs. 300 p.m. per child — max. 2 children) is exempt.

• Transport Allowance: Rs. 800 p.m.— Rs.1,600 p.m. (If handicapped)

• Fixed Medical Allowance is taxable in the hands of employees however, Medical Faciliües in a private clinic is exempt to the extent of Rs. 15,000 and in government hospitals to any extent.

• Contribution to Medical Insurance Policy by employer is exempt to tax in th hands of employees to any extent.

• Amount spent for providing free educaonal facilies and training of the employee is not taxable in the hands of employees to any extent

• Gift to employees of Movable Assets (other than computer/laptop, electronic items and car) after using for 10 yrs.

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

• 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.

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