Fringe Benefits or Amenities which shall be Taxable Perquisite in the hands of All Employees
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Valuation of Perquisite in respect of Interest-Free Loan or Loan at Concessional Rate of Interest [Section 3(7)(i)]
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Valuation of Perquisites in respect of Travelling, Touring, Accommodation [Rule 3(7)(ii)]
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Valuation of Perquisites in respect of Lunch / Refreshment, etc. [Rule 3(7)(iii)]
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Valuation of Perquisites in respect of Gift, Voucher or Token [Rule 3(7)(iv)]
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Valuation of Perquisites in respect of Credit Card Facilities [Rule 3(7)(v)]
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Valuation of Perquisites in respect of Club Expenditure or Membership [Rule 3(7)(vi)]
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Perquisites in respect of Use of Employer's Movable Assets [Rule 3(7)(vii)]
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Valuation of the Perquisites in respect of Movable Assets sold by an Employer to its Employees at a Nominal Price [Rule 3(7)(viii)]
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Valuation of Perquisites in respect of Any other benefit, amenity, etc. [Rule 3(7)(viii)]
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1. Valuation of Perquisite in respect of Interest-Free Loan or Loan at Concessional Rate of Interest [Section 3(7)(i)]
If a loan is given by an employer to the employee (or any member of his household), it is a perquisite chargeable to tax. It is taxable on the following basis—
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Step 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).
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Step 2 : Find out rate of interest charged by the State Bank of India (SBI) as on the first day of the relevant previous year in respect of loan for the same purpose advanced by it [see para 15.10-1].
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Step 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.
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Step 4 : From the total interest calculated for the entire previous year under Step 3, deduct interest actually recovered, if any, from the employee during the previous year.
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Step 5 : The balance amount [i.e. Step 3 minus Step 4] is taxable value of the perquisite.
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2. Valuation of Perquisites in respect of Travelling, Touring, Accommodation [Rule 3(7)(ii)]
The basis of valuation is as follows—
| Mode of Valuation |
Perquisite in respect of travelling, touring, accommodation and any other expenses paid by employer for any holiday availed by employee (or any member of household) other than leave travel concession. |
Where such facility is available uniformly to all employees |
Where such facility is not available
uniformly to all employees |
Step 1 -
Find out cost to the Employer |
Expenditure incurred by the Employer |
Value at which such facilities are offered by other agencies to the public. |
Step-2 :
Less : Amount recovered from the Employee |
Recovered from the Employee |
recovered from the Employee |
Taxable Value of Perquisites
( Step 1 - Step 2) |
Balancing amount
(if it is positive). |
Balancing amount
(if it is positive). |
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3. Valuation of Perquisites in respect of Lunch / Refreshment, etc. [Rule 3(7)(iii)]
If any lunch allowance, dinner allowance or refreshment allowance is given to an employee, it is chargeable to tax.
The value of free meals provided by the employer is taxable as follows—
| Mode of Valuation |
Food and Non-alcoholic beverages is provided in working hours in remote area or in an offshore installation. |
Lunch / Refreshment is provided in working hours or extended working hours at any other place |
| Tea, Snacks, and Non-alcoholic beverages in office premises |
Food in office premises or through non-transferable paid voucher usable only at eating joints. |
Step 1 :
Find out Cost to the Employer |
NIL |
NIL |
Cost to the Employer in excess of Rs.50 per meal. |
Step-2 :
Less : Amount recovered from the Employee |
NIL |
NIL |
Recovered from the Employee |
Taxable Value of Perquisites
( Step 1 - Step 2) |
NIL |
NIL |
Balancing amount
(if it is positive). |
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4. Valuation of Perquisites in respect of Gift, Voucher or Token [Rule 3(7)(iv)]
Tax Treatment :
(A) Aggregate Value of Gift is upto Rs. 5000 during the previous year :
(B) Aggregate Value of Gift is more than Rs. 5000 during the previous year :
- Perquisites Value is the value in excess of Rs. 5000
Note :
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Gift in the form of Cash or Convertible into Cash are outside the ambit of this Rule and accordingly Taxable
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With effect from the Assessment Year 2010-11 onwards, this Perquisites is Taxable in the hands of all Employees due to abolition of Fringe Benefits.
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5. Valuation of Perquisites in respect of Credit Card Facilities [Rule 3(7)(v)]
The perquisite in respect of credit card is taxable as follows—
(A) Used for Personal or Private Purposes :
- Perquisites Value is equal to Expenses, Membership Fees and Annual Fees incurred by the Employee and Reimbursed / Paid by the Employer.
(B) Used Wholly and exclusively for Official Duties
Note : With effect from the Assessment Year 2010-11 onwards, this Perquisites is Taxable in the hands of all Employees due to abolition of Fringe Benefits. |
6. Valuation of Perquisites in respect of Club Expenditure or Membership [Rule 3(7)(vi)]
Employers often extend membership of reputed Clubs to senior Corporate Employees and they can use the same for Private or Official purposes or for Both.
The perquisite in respect of club facility is taxable as follows—
(A) Used for Private Purpose
- Perquisites value is the expenditure incurred by employer including the amount of annual or periodical Fee
(B) Used for discharged of Official Duties
(C) Provision of Health Club, Sports Club, etc. facilities to all employees uniformly
Notes:
1. In case the Club facilities are used exclusively for official purposes, details pertaining to date, nature of expenditure and business purpose need to be maintained by the employer.
2. The employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.
With effect from the Assessment Year 2010-11 onwards, this perquisite is taxable in the hands of all employees due to abolition of fringe benefits tax.
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7. Perquisites in respect of Use of Employer's Movable Assets [Rule 3(7)(vii)]
The value of benefit to the employee resulting from the use by the employee or any member of his household of any moveable asset belonging to the employer or hired by him shall be determined as under:
Tax Treatment :
(A) When the Movable Assets is owned by the Employer :
- Value of Perquisites is 10% per annum of the actual cost of the Asset
(B) When the Movable Asset is Hired by the Employer :
- Perquisites Value is Rent/Hire Charges Paid / payable by the Employer.
Note :
- In case the Club facilities are used exclusively for official purposes, details pertaining to date, nature of expenditure and business purpose need to be maintained by the employer.
- The employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.
With effect from the Assessment Year 2010-11 onwards, this perquisite is taxable in the hands of all employees due to abolition of fringe benefits tax. |
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8. Valuation of the Perquisites in respect of Movable Assets sold by an Employer to its Employees at a Nominal Price [Rule 3(7)(viii)]
The value of benefit to the employee arising from the transfer of any moveable asset belonging to the employer directly or indirectly to the employee or any member of his household shall be determined as under:
Tax Treatment :
(A) If Movable Assets are Computers and Electronic Items :
- Perquisite Value is the difference between the Actual cost of assets as reduced by 50% (Reducing Balance Method) for each completed year from the period it was put to use and the amount paid by the employee.
(B) If Movable Assets are Motor Cars :
- Perquisite Value is the difference between the Actual cost of assets as reduced by 20% (Reducing Balance Method) for each completed year from the period it was put to use and the amount paid by the employee.
(C) In case of any Other Movable assets :
- Perquisite Value is the difference between the Actual cost of assets as reduced by 10% of cost for each completed year from the period it was put to use and the amount paid by the employee.
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9. Valuation of Perquisites in respect of Any other benefit, amenity, etc. [Rule 3(7)(viii)]
Meaning:
The employer will issue the shares of his company to the employees at a discount price compared to the market price or by free of cost in order to retain the best talent and enhance their commitment to the Company. Such shares have to be issued under Employees Stock Option Scheme (ESOS) or Employees Stock Option Plan of the Company (ESOP).
Tax Treatment:
This perquisite is taxable in the hands of all employees due to abolishing of fringe benefits tax. The perquisite value would be the difference between fair market value of shares to be determined as per the Income Tax Rules as on the date of exercise of option and actual amount paid by the employee. It would be taxed in the Assessment Year relevant to the previous year in which share are allotted! transferred to the employee |
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