Perquisites are the additional benefits or emoluments attached to the wages or salary of an employee. An employer may provide perquisites in cash or kind.
Such perquisites are taxable under the head “Salaries.” The taxable value of perquisites in the hands of the employees is the cost to the employer.
Perquisites under section 17(2) of the Income-tax Act, 1961 includes the following items. Further, the specific rules for the taxable value of perquisites are provided in Rule 3 of the Income-tax rules:
Section | Perquisites | Taxable value of perquisites |
17(2)(i) | Rent-free accommodation
| License Fees for allotment of houses as per rule 3(1) |
17(2)(ii) | Any concession in the rent accommodation | License Fees for allotment of houses as per rule 3(1) |
17(2)(iii) | If the employee gets any benefit or amenity granted at free of cost or concessional rate in any of the following cases:
(i) by a company to an employee who is a director thereof; (ii) by a company to an employee, who has a substantial interest in the company; (iii) by any employer/company to an employee (to whom provisions of (i) and (ii) above do not apply and whose income under the head “Salaries” exceeds 50,000. | Fully taxable. However, such an amount shall exclude the value of all benefits or amenities not provided for by way of monetary benefits.
|
17(2)(iv) | Payment by the employer in respect of any obligation, which is paid by the employee | Fully taxable |
17(2)(v) | Any sum payable by the employerto affect an assurance on the life of the employee or to affect a contract for an annuity. | Fully taxable |
17(2)(vi) | The value of transfer of specified security or sweat equity shares by the employer or former employer, free of cost or at a concessional rate to the assessee | The value shall be the fair market value of the specified security or sweat equity sharesless the amount actually paid by the assessee. The value shall be taken ason the date on which the assessee exercises its option. |
17(2)(vii) | The amount of any contribution made to the account of the employee by the employer: (a) an approved superannuation (b) in the scheme as per section 80CCD(1) (c) in a recognized provident fund | To the extent amount exceeds Rs. 7,50,000 in a previous year |
17(2)(viii) | The value of any other fringe benefit or amenity provided by the employer.
| Cost to the employer less amount recovered from the employee. Note: Various benefits and the method of computing their taxable value are prescribed under rule 3 of the Income tax rules. |
The perquisites are taxable under the head “Salaries” if they fulfil the following conditions:
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