PERQUISITES Sec.

17(2)
• The term “perquisites” means any extra benefit
granted to the employee in addition to his Click icon to add picture
salary.
• It may be given in cash or kind.
• Allowances are monthly fixed amounts, while
perquisites are benefits or facilities provided
by the Employer
• Reimbursement of expenses incurred in the
official discharge of duties is not a perquisite.
 Tax Free Perquisites in All Cases
Perquisite Explanation
Telephone Telephone provided by an employer to an employee at his
residence
Transport facility provided by an employer engaged in the
Transport Facility
business of carrying of passengers or goods to his employees
either free of charge or at concessional rate
Privilege passes and privilege ticket orders granted by Indian
Privilege passes and privilege ticket Railways to its employees

Perquisites allowed outside India by the Government Perquisites allowed outside India by the Government to a citizen of
India for rendering services outside India

Employer’s contribution to staff group insurance scheme Employer’s contribution to staff group insurance scheme

Annual premiumby employer on personal accident policy Payment of annual premium by employer on personal accident policy
effected by him on the life of the employee

Refreshment Refreshment provided to all employees during working hours in

office premises
 Perquisite Explanation

Subsidized lunch Subsidized lunch provided to an employee during working hours at office or business
premises provided the value of such meal is upto ₹50. If lunch Provided in remote area
not taxable
Recreational facilities Recreational facilities, including club facilities, extended to
employees in general i.e., not restricted to a few select employees
Amount spent by the employer on training of employees or
Amount spent on training of employees amount paid for refresher management course including expenses on boarding and
lodging
Sum payable by employer to a RPF or an approved Sum payable by an employer to a RPF or an approved superannuation fund or deposit-
superannuation fund linked insurance fund established under the Coal Mines Provident Fund and
Miscellaneous provisions Act, 1948 or the Employees’ Provident Fund
andMiscellaneous Provisions Act, 1952 upto 7,50,000
Leave travel concession, subject to the conditions specified under section 10
Leave travel concession Note: Value of Leave travel concession provided to the High Court judge or the
Supreme Court Judge and members of his family are completely exempt without any
conditions
Medical facilities (Note 1)

Rent-free official residence Rent-free official residence provided to a Judge of a High Court or
the Supreme Court
Laptops and Computers Even for personal Use

Rent-free official residence Provided to Minister, Officer of parliament etc

Interest free or concessional loan Not exceeding Rs.20,000

 Medical Facilities (Note 1)

Treatment in India Treatment Outside India

Benefit of
Benefit of Stay Benefit of Travel
Governme Government Treatment
Otherwi
nt Hospital Recognised Exempt upto Exempt upto GTI
-1 Hospital-2 se GTI upto
Limit Limit above
Prescribed by ₹2,00,0 ₹2,00,0
Prescribed by
RBI 00 00
RBI
Employer’
s Hospital Fully Fully
Fully
-3 Taxable Exempt
Taxabl
e
1. Exemption for treatment is allowed for Employee, Spouse,
Children, and Dependent Relatives (Mother, Father, Brother, Sister)
Fully 2. Exemption of Stay and Travel is allowed only for patient and one
Exempt attendant.
3. Medical insurance premium paid by employer is fully exempt
 Leave Travel Concession
• An employer can reimburse the traveling expenses of the employee or
his relatives. This is known as Leave Travel Concession
• LTC exemption is available only for the travel of assessee, his spouse,
children, and dependent relatives (mother, father, brother, sister).
• Exemption of LTC is available only for 2 children born on or after 01-
10-1998. This limit is not applicable in case of multiple births after one
child.
1. If the first born child is a single child, and the next time you
get twins, then exemption will be available to all the three
children.
2. If you get twins the first time itself, and the next time, a single
child is born, exemption will be available only to the first
born twins, and not to the third child.
• LTC exemption is available for 2 journeys during the block of 4 calender
years. If exemption is not claimed in any block, then one year can be
carried forward to next block.
Exemption is as follows:
Perquisites taxable for all Employees

1. Residential accommodation provided to an EE at concessional rent

2. Any sum paid as life insurance on the life of the EE for an annuity
scheme
3. Fringe benefit including interest free or concessional loan, use of
movable asset, transfer of movable asset etc.
4. Income tax paid on behalf of EE
5. Legal expenses paid on behalf of EE
6. ER’s contribution to superannuation fund, RPF and NPS over
Rs.7,50,000per year
7. Value of sweat equity shares allotted to the Employee at
concessional rate
8. Payment of any loan or interest thereon on behalf of the EE
9. Any obligation of the EE paid by the ER(water bill, Hotel bills etc.)
Perquisites Taxable only in the Case of Specified Employees
• Car Facility
• Provision for Sweeper,Watchman,Gardener
• Domestic Servant
• Facility for Gas, Electricity, or Water
• Education Facility to the EE or family
• Transport Facility provided by a transport undertaking.
• Medical facility
“Specified Employee” means:
• An employee of a company who is also a director
• An employee who has substantial interest in the company, i.e.,
having 20% or more voting rights
• An employee drawing in excess of ₹50,000 as his salary income.
While computing this limit of ₹50,000, following shall be deducted:
a) All non-monetary benefits
b) All monetary payments exempt u/s 10
c) Deductions u/s 16, i.e., Standard Deduction, Entertainment Allowance,
and Professional Tax
Rent Free Accommodation and
Concession in Rent
 Notes
1. Accommodation includes a house, flat, farmhouse or part thereof, or accommodation in a hotel, motel, service apartment, guesthouse,
caravan, mobile home, ship, or other floating structure.
2. In all the cases above, if the employer recovers any amount from the employee, be it for rent or for furniture, it is deducted from the
value of perquisite calculated above.
3. Salary =
• Basic Salary
• DA (in terms)
• Bonus
• Taxable Allowances
• Commission (All types)
• Monetary Income (Other than Perquisites)
4. For calculating the salary, perquisites shall not be considered.
5. The salary as per note 2 should be calculated on due basis, i.e., only the salary of current year should be considered. Advance Salary or
Arrears in Salary should be ignored
6. Salary as per note 2 should be considered for the time for which assessee has occupied the house.
7. Employer contribution towards PF and interest should be ignored.
8. For computing salary as per note 2, retirement benefits should not be considered, i.e., gratuity, pension, leave salary, etc.
9. If hotel facility is provided at the time of transfer of employee and if it is upto 15 days, then it is not taxable.
10. f the employee has been transferred to another place, and he has been provided an accommodation at the new place, while still retaining
the accommodation of the old place, then:
• For the first 90 days, the value of rent-free accommodation will be the value of that accommodation the value of which is lower
(as calculated as per rules)
• After 90 days, the value of rent-free accommodation shall be the total value of both the accommodations
Question
Mrs. Padma (age 25 years) is offered an employment by Pritam Ltd. at a basic salary of ₹24,000 per month; other
allowances according to rules of the company are – Dearness allowance: 18% of basic pay (not forming part of salary for
calculating retirement benefits); Bonus: 1 month basic pay; and Project Allowance: 6% of basic pay.
The company gives Mrs. Padma an option either to take a rent-free unfurnished accommodation at Mumbai for which the
company would directly bear the rent of ₹15,000 per month or to accept a house rent allowance of ₹15,000 per month and
find out her own accommodation. If Mrs. Padma opts for house rent allowance, she will have to pay ₹15,000 per month for
an unfurnished house. Which one of the two options should be opted by Mrs. Padma in order to minimize her tax liability?
 Computation of Total Taxable Income of Mrs. Padma

Particulars HRA RFA

Basic Salary (₹24,000 × 12) 2,88,000 2,88,000

Dearness Allowance (18% × ₹2,88,000) 51,840 51,840

Bonus (1 month Basic Pay) 24,000 24,000

Project Allowance (6% × ₹2,88,000) 17,280 17,280

House Rent Allowance (Note 1) 36,000

Rent Free Accommodation (Note 2) 49,392

Total Taxable Salary Income 4,17,120 4,30,512

Therefore, Mrs. Padma should opt for House Rent Allowance to minimize tax liability.
Sweeper, Gardener, Watchman, or
Personal Attendant
If any sweeper, gardener, watchman or personal attendant is provided to an employee
or any of his household member, then the value of perquisite shall be:
Salary paid or payable to such person – amount recovered from the employee.

Gas, Electricity or Water Facility

• If these things are supplied by the employer from his own sources,
Value of perquisite = Manufacturing Cost Per Unit × Number of Units Consumed
by the Employee
• If these things are supplied by the employer from outside agencies,
Value of perquisite = Hire Charges paid to such agencies
If any amount is recovered from the employee, the same shall be reduced to arrive at
taxable value, if any

.
Free or Concessional Educational Facility

Value of perquisite = actual expenditure incurred by the employer, if the employer

incurs cost of education
Value of perquisite = cost of such education in a similar institution in or near the locality,
• if the Educational Institution is owned and maintained by the employer, or
• free educational facility is provided in any other institution by reason of his employment
with that employer

The perquisite is exempt if:

Free education facility is provided to children of the employee, and
Value of Perquisite is upto ₹1,000 p.m. per child
otherwise, it is fully taxable.
Any amount paid or recovered from the employee shall be reduced from value of perquisite
Vidya Bhawan is owned by ABC Ltd. Shri Ramesh is an employee of ABC Ltd. drawing salary of ₹2,00,000 and his following
family members are studying in the said school. Find out the taxable value of perquisite
Particulars Rahul, son of Kajri, daughter of
Ramesh Ramesh

Cost of education in a similar ₹3,500 p.m. ₹1,800 p.m.

institution

Amount charged from Ramesh ₹2,500 p.m. -

Solution
The perquisite in respect of education facility is exempt if it is upto ₹1,000 p.m. If the value exceeds ₹1,000 p.m., then the
entire amount is taxable. Further, if the value of concessional facility is upto ₹1,000 p.m., it will also be exempt.
In case of Rahul, the value of perquisite shall be ₹3,500 – ₹2,500 = ₹1,000 p.m. As the value of perquisite doesn’t exceed
₹1,000 p.m., the perquisite shall not be taxable.
In case of Kajri, the value of perquisite is ₹1,800 p.m., which exceeds ₹1,000; therefore, the entire amount shall be taxable.
Value of taxable perquisite = 1,800 × 12 = ₹21,600.
 Sweat Equity Shares or
Securities
• Sweat Equity Shares are a specific type of equity share issued by a
company to its directors or employees at a discount or for
consideration other than cash as a reward for their hard work and
contributions to the company
• Specified Securities (refer text) or sweat Equity Shares are taxable
in the hands of the allottee, subject to following conditions:
Taxable
Particulars Value: ₹
Fair Market Value (determined as per prescribed method) of the
security or sweat equity shares on the date on which the option XX
is exercised by the assessee/employee
Less: Amount actually paid by, or recovered from assessee in
respect of such security or shares XX
Value of Such Security or Sweat Equity Shares XXX
Fringe Benefits Taxable for All Employees
Fringe benefit means an extra benefit supplementing an employee's
money wage or salary. These are considered as perquisites.
1. Interest Free or Concessional Loans
Taxable Perquisite = Loan Amount × [SBI Interest Rate on 1st April of P.Y. – Actual Rate of
Interest]
Notes:
• If aggregate loan is upto ₹20,000, then interest benefit is NOT taxable.
• If loan is taken for treatment of specified disease, then interest benefit is not
taxable even if loan amount is more than ₹20,000.
Question: 1
Ram is working as a General Manager of A Ltd. on a monthly salary of ₹20,000. In the previous year ending 31-03-2023, the
company provided him the following:
1. Interest free loan (on 01-10-2023)
a) For purchase of residential flat (repayable in 8 years) (SBI Rate 12.25%): ₹5,00,000
b) Education loan (for son) (SBI Rate 11.5%): ₹15,000
2. Loan for purchase of computer on 01-10-2023 (8% interest p.a.) (SBI Rate 15.25%): ₹30,000
Computation of Value of Taxable Perquisite of Ram for A.Y. 2024-25
Particulars ₹

Interest on Housing Loan (12.25% × ₹5,00,000 × 6/12) 30,625.00

Education Loan (11.5% × ₹15,000 × 6/12) 862.50

Loan for Purchase of Computer [(15.25% – 8%) × ₹30,000 × 6/12] 1087.50

Taxable Value of Perquisite 32,575.00

Since the aggregate value of all the loans during the previous year exceeds ₹20,000,
hence the education loan, though less than ₹20,000 shall also be considered for
valuation of perquisite.
2. Use of Moveable Assets

Use of Moveable Asset

Computer/
Car Any other Asset
Laptop

Fully Exempt See next Slide Owned by Employer Hired by Employer

Taxable Amount =
Taxable Amount-
Hire Charges Paid
10% of Cost by Employer
3. Transfer of Moveable Assets

Depreciation should be calculated only for each completed year from the date on which employer acquires the asset till
transfer of asset.
Question
Find out the taxable value of perquisites from the following particulars in case of an employee to whom the following
assets held by the company were sold on 13th September, 2022:

Particulars Car Laptop Furniture

Cost of Purchase (in May 2020) 8,72,000 1,22,500 35,000

Sale Price 5,15,000 25,000 10,000

The assets were put to use by the company from the day these were purchased.
 Computation of Taxable Value of Perquisite

Car Laptop Furniture

Particulars
(20% WDV) (50% WDV) (10% SLM)
Cost of Asset 8,72,000 1,22,500 35,000
Less: Depreciation for 1st year ended May 2021 1,74,400 61,250 3,500
Balance as on 1st June, 2021 6,97,600 61,250 31,500
Less: Depreciation for 2nd year ended May 2022 1,39,520 30,625 3,500
Balance as on 1st June, 2022 5,58,080 30,625 28,000
Less: Sale Price 5,15,000 25,000 10,000
Taxable Value of Perquisites 43,080 5,625 18,000
Question-2
Following benefits have been granted by Ved Software Ltd. to one of its employees Mr. Badri:
1. Housing Loan @ 6% per annum. Amount outstanding on 01-04-2023 is ₹6,00,000. Mr. Badri pays ₹12,000 per
month, on 5th of each month.
2. Air conditioners purchased 4 years back for ₹2,00,000 have been given to Mr. Badri for
₹90,000.
Compute the chargeable perquisite in the hands of Mr. Badri for the assessment year 2024-25.
The lending rate of SBI as on 01-04-2023 for housing loan may be taken as 10%.
 Computation of Taxable Perquisites of Mr. Badri for A.Y. 2024-25
Particulars ₹

Concessional Loan (Note 1) 20,880

Transfer of Moveable Asset
Actual Cost of Air Conditioners 2,00,000
Less: 10% Depreciation on SLM Basis for 4 years (10% × ₹2,00,000 × 4) 80,000
Amount paid by Mr. Badri 90,000 30,000
Taxable Value of Perquisite 50,880
Note 1 - Calculation of Perquisite pertaining to concessional
loan
Month Opening Instalment Closing Perquisite Value
Balance Paid Balance [(10% – 6%) × (4) × 1/12]
(1) (2) (3) (4) (5)
April, 2023 6,00,000 12,000 5,88,000 1,960
May, 2023 5,88,000 12,000 5,76,000 1,920
June, 2023 5,76,000 12,000 5,64,000 1,880
July, 2023 5,64,000 12,000 5,52,000 1,840
August, 2023 5,52,000 12,000 5,40,000 1,800
September, 2023 5,40,000 12,000 5,28,000 1,760
October, 2023 5,28,000 12,000 5,16,000 1,720
November, 2023 5,16,000 12,000 5,04,000 1,680
December, 2023 5,04,000 12,000 4,92,000 1,640
January, 2024 4,92,000 12,000 4,80,000 1,600
February, 2024 4,80,000 12,000 4,68,000 1,560
March, 2024 4,68,000 12,000 4,56,000 1,520
Total 20,880
 3. Gift to Employee

• Gift in Cash- Fully Taxable

• Gift in Kind-

If FMV less than Rs.5,000- Fully Exempt

Otherwise- Fully Taxable
 Motor Car
Particulars Use
Wholly Official Partly Official Partly Private Wholly Private
Cubic Capacity ≤ 1.6 Litres Cubic Capacity >1.6 Litres

₹1,800 p.m.+₹900 p.m. (if ₹2,400 p.m.+ ₹900 p.m. (if

driver is also provided) driver is also provided) Maintenance Charges incurred
Maintained by NIL by ER + driver’s Salary + 10%
Employer of Cost for wear & tear –
Amount Recovered from
Owned by
Employee
Employer
₹600 p.m. + ₹900 ₹900 p.m. + ₹900
Maintained by NIL p.m. (if driver is also provided) p.m. (if driver is also 10% of Cost
Employee provided)

₹1,800 p.m. + ₹900 p.m. (if ₹2,400 p.m. +₹900 p.m. (if
NIL driver is also provided) driver is also provided) Maintenance Charges +
Hired by Maintained by driver’s Salary + Hire Charges
Employer Employer – Amount Recovered from
Employee

NIL ₹600 p.m. + ₹900 p.m. (if ₹900 p.m. + ₹900 p.m. (if
Maintained by driver driver is also provided) Hire Charges
Employee is also provided)

Amount Incurred by Amount Incurred by Amount Incurred by

Owned by NIL Employer + Employer + ₹900 p.m. (if Employer–Amount Recovered
Employee Maintained by
Employer ₹900 p.m. (if driver is also driver is also provided) from Employee
provided) – ₹1,800 p.m. – ₹2,400 p.m.
If the employer provides more than one car, the perquisite value is calculated
as if one car is used for both work and personal stuff, and the other car(s) are
used only for personal stuff
Profits in Lieu of Salary
It means any payment made by an employer to the employee instead of salary.
Profits in lieu of salary includes the following:
1. Compensation on account of termination of his employment: The amount of any
compensation due to or received by an assessee from his employer or former employer
at or in connection with the termination of his employment.
2. Compensation on account of modification of the terms and conditions of employment
3. Payment from unrecognized fund provident fund or superannuation fund
If any sum is paid to an employee at the time of maturity from an unrecognised
provident fund , that part of the sum which represents the employer’s contribution
to the fund and interest thereon is taxable under the head “Salaries”.
4. Keyman Insurance policy
5. Lumpsum Payment or otherwise: Any amount, whether in lumpsum or otherwise, due
to the assessee or received by him, from any person –
a) before joining employment with that person, or
b) after cessation of his employment with that person