PERQUISITES MEANING

    

 
Section 17(2) defines perquisites to include:
 
   Chargeable to Tax in the hands of Specified + Non- Specified Employees both.

  • The value of Rent Free Accommodation provided to the assessee by his employer (whether Furnished or Unfurnished);
      

  • The value of any Concession w.r.t any accommodation provided to the assessee by his employer;
     

  • Any sum paid by the Employer w.r.t any obligation liable to be discharged by the Employee;
      

  • Any sum payable by Employer towards a Life assurance Policy or towards a Contract of Annuity;
     

   Chargeable to Tax in the hands of only Specified Employees.

  • The value of any amenity granted at Free of Cost or Concessional rate to the assessee by his employer; 
      

  • The value of Fringe Benefits or amenities (not being the ones chargeable in the hands of the employer u/s 115WB):-

  • Interest free concessional rent
     

  • Use of moveable assets
     

  • Transfer of moveable assets
     

  • Medical facilities to employees

PLEASE NOTE:
The Perquisites chargeability is decided on the Nature of the Employer & consequent levy of Fringe Benefit Tax on such Employer as per Income Tax Act. The following table would clarify the scenario to a great extent, however this list is not of an exhaustive nature though a thoughtful attempt is made to include all possible types of perquisites in practical circumstances:

Sr. No.  Nature of Perquisite Nature of Employee* FBT chargeability as per nature of Employer
 Taxed as Perquisite in hands of Employee
Category A Category B Category A Category B
1 Motor Car (Owned or Hired) A B YES NO NO YES
2 Free or Concessional Transport  A B YES NO NO YES
3 Free or Concessional Lunch/ Refreshment A B YES NO NO YES
4 Free or Concessional Travelling/ Touring facility A B YES NO NO YES
5 Gift, Voucher or Token A B YES NO NO YES
6 Credit Card facility A B YES NO NO YES
7 Club facility A B YES NO NO YES
8 Rent Free Furnished/ Unfurnished Accommodation or Hotel Accommodation (including reimbursement of hotel bills) A B YES NO NO YES
9 Discharge of Monetary obligation of employee by employer A B NO NO NO NO
10 Payment towards Life assurance/ annuity policy for employee A B YES NO NO YES
11 Sweeper, Gardener or Watchman A B NO$ NO$ NO$ NO$
12 Free Supply of Gas, Electricity or Water A B NO$ NO$ NO$ NO$
13 Free Education A B NO$ NO$ NO$ NO$
14 Interest free loan A B NO NO YES YES
15 Use of Moveable Assets A B NO NO YES YES
16 Transfer of Moveable Assets A B NO NO YES YES
17 Medical Facility upto Rs. 15000 p.a A B YES NO NO NO
18 Medical Facility exceeding Rs. 15000 p.a A B NO NO YES YES
19 Allotment of Securities under ESOP A B YES N.A. NO N.A.
20 Telephone/ Mobile facility to employees A B YES NO NO YES
21 Scholarship facility to employee or his relative A B YES NO NO YES
22 Free/ Concessional ticket for private journeys of employees or his relatives A B YES NO NO YES
23 Use of Laptops/ Computers
 		A B NO NO NO NO
24 Tax paid by employer on Non Monetary perquisites provided to employee. A B NO NO NO NO
25 Payment towards Accident/ Workman compensation insurance but not under a statutory obligation A B YES NO NO YES
26 Transport facility to Employees children A B YES NO NO YES
27 Crèche facility to the children of employees A B YES NO NO YES
28 Reimbursement of expenses towards Entertainment A B YES NO NO YES
29 Reimbursement of expenses incurred on get- together of employees/ directors/ others. A B YES NO NO YES
30 Reimbursement towards Books & Periodicals A B YES NO NO YES
31 Any Other Perquisite (chargeable to FBT) A B YES NO NO YES
32 Any Other Perquisite (not chargeable to FBT) A B NO NO YES YES
 

EXPLANATION:

  • The Explanation for the above treatment of various perquisites is based on the fact that any expenditure borne by the Employer which is chargeable to Fringe Benefit Tax (FBT), such expenditure consequently gets exempted in the hands of the Employee, however conversely expenses which are not chargeable to FBT either because of specific or implied exclusion by law or such expenses being incurred by an Employer falling in the ‘Category B’ as stated below then such expenses shall be chargeable in the hands of the Employee under ‘Income from Salaries’ for Income tax purposes.
     

  • Expenditure incurred by the Employer which is fully exempted from tax e.g. Item 23 & 24 above shall not be chargeable to tax both in the hands of employer & employee. 

II) PLEASE NOTE

1) * Nature of Employee
Category A
a) Company;
b) Firm;
c) An AOP or BOI whether incorporated or not;
d) A local authority
e) Every artificial juridical person not falling under any clauses from (1) to (4) as stated above.

Category B
a) Sole Proprietor (Individual)
b) HUF
c) Government
d) Political Party registered under Section 29A of the Representation of the People Act’ 1951.
e) Persons eligible for exemption under Section 10(23C)
f) A Charitable Institution registered under Section 12AA
g) RBI
h) SEBI
i)  Any other Employer not liable to Fringe Benefit Tax.

2) NO$
These perquisites are chargeable to tax in the hands of employee only if such employee is a Specified Employee; else it is chargeable in the hands of the Employer being an item taxable under FBT.

The Perquisites taxable in the hands of the Employees are valued in accordance with the provisions laid under the Income Tax Rules. Under these rules perquisites provided by the employer (directly or indirectly) to the employee or any Member of his Household (by reason his employment) shall be taken into consideration, wherein Member of his Household shall include:

  • Spouse (whether dependent or not)
     

  • Children (whether dependent or not)
      

  • Parents (whether dependent or not)
     

  • Servants & Dependents