My Tax & Diary

Home >> Income Tax >> You are Here
Last modified / updated Feb. 04, 2016

Income Tax Act, 1961 : Income Exempted and Chargeable under the Head "Salaries"


13. DEFINITION OF "PERQUISITE" (SECTION 17)

Perquisite includes
  • The value of rent free accommodation provided to the employee by his employer;
  • The value of any concession in the matter of rent in respect of any accommodation provided to the employee by his employer;
  • The value of any benefit or amenity granted or provided free of cost or at concessional rate
  • Any sum paid by the employer in respect of any obligation which would otherwise have been payable by the assessee.
  • Any sum payable by the employer, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund or other specified funds u/s 17, to effect an assurance on the life of an assessee or to effect a contract for an annuity.
  • The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the employee and for this purpose, .

    (a) "specified security" means the securities as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956 and, where employees' stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme;

    (b) "sweat equity shares" means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;

    (c) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from the assessee in respect of such security or shares;

    (d) "fair market value" means the value determined in accordance with the method as may be prescribed;

    (e) "option" means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;

  • The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees; and
  • The value of any other fringe benefit or amenity as prescribed (in Rule 3).

    13 (i) Rent Free Accommodation & Motor car provided by the Employer

    "Accommodation" includes a house, flat, farm house or part thereof , hotel accommodation, motel, service apartment, guest house, a caravan, mobile home, ship or other floating structure.

    A. For valuation of the perquisite of rent free unfurnished accommodation, all employees are divided into two categories:

  • For employees of the Central and State governments the value of perquisite shall be equal to the licence fee charged for such accommodation as reduced by the rent actually paid by the employee. Employees of autonomous, semi-autonomous institutions, PSUs/PSEs & subsidiaries, Universities, etc. are not covered under this provision.
  • For all others, i.e., those salaried taxpayers not in employment of the Central government and the State government, the valuation of perquisite in respect of accommodation would be at prescribed rates, as under:

    a) Where the accommodation provided to the employee is owned by the employer

    S No Cities having population as per the 2001 census Perquisite
    1 Exceeds 25 lakh 15% of salary
    2 Exceeds 10 lakhs but does not exceed 25 lakhs 10% of salary
    3 For other places 7.5 % of salary

    b) Where the accommodation so provided is taken on lease/ rent by the employer:

    The prescribed rate is 15% of the salary or the actual amount of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee. Meaning of 'Salary' for the purpose of calculation of perquisite in respect of Residential Accommodation :

    1. Basic Salary ;
    2. Dearness Allowance, or Dearness Pay if it enters into the computation of superannuation or retirement benefit of the employees;
    3. Bonus ;
    4. Commission ;
    5. Fees ;
    6. All other taxable allowances (excluding the portion not taxable ); and
    7. Any monetary payment which is chargeable to tax (by whatever name called).

    Salary from all employers shall be taken into consideration in respect of the period during which an accommodation is provided. Where on account of the transfer of an employee from one place to another, he is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value for a period not exceeding 90 days and thereafter the value of perquisite shall be charged for both such accommodation.

    B Valuation of the perquisite of furnished accommodation, the value of perquisite as determined by the above method (in A) shall be increased by )

  • 10% of the cost of furniture, appliances and equipments, or
  • where the furniture, appliances and equipments have been taken on hire, by the amount of actual hire charges payable as reduced by any charges paid by the employee himself.

    13 (ii) Perquisite on Motor car provided by the Employer

    (A) If an employer provides motor car facility to his employee the value of such perquisite shall be :

  • Nil, if the motor car is used by the employee wholly and exclusively in the performance of his official duties.
  • Actual expenditure incurred by the employer on the running and maintenance of motor car including remuneration to chauffeur as increased by the amount representing normal wear and tear of the motor car and as reduced by any amount charged from the employee for such use (in case the motor car is exclusively for private or personal purposes of the employee or any member of his household).
  • Rs. 1800/- (plus Rs. 900/-, if chauffeur is also provided) per month (in case the motor car is used partly in performance of duties and partly for private or personal purposes of the employee or any member of his household if the expenses on maintenance and running of motor car are met or reimbursed by the employer). However, the value of perquisite will be Rs. 2400/-(plus Rs. 900/-, if chauffeur is also provided) per month if the cubic capacity of engine of the motor car exceeds 1.6 litres.
  • Rs. 600/- (plus Rs. 900/-, if chauffeur is also provided) per month (In case the motor car is used partly in performance of duties and partly for private or personal purposes of the employee or any member of his household if the expenses on maintenance and running of motor car for such private or personal use are fully met by the employee). However, the value of perquisite will be Rs. 900/- (plus Rs. 900/-, if chauffeur is also provided) per month if the cubic capacity of engine of the motor car exceeds 1.6 litres.

    (B) If the motor car or any other automotive conveyance is owned by the employee but the actual running and maintenance charges are met or reimbursed by the employer, the method of valuation of perquisite value is different and as below:

  • where the motor car or any other automotive conveyance is owned by the employee but actual maintenance & running expenses (including chauffeur salary, if any) are met or reimbursed by the employer, no perquisite shall not be chargeable to tax if the car is used wholly and exclusively for official purposes. However following compliances are necessary:

    (a) The employer has maintained complete details of the journey undertaken for official purposes;

    (b) The employer gives a certificate that the expenditure was incurred wholly for official duties.

    However if the motor car is used partly for official or partly for private purposes then the amount of perquisite shall be the actual expenditure incurred by the employer as reduced by the amounts in c) & d) referred to in (1) above, as the case may be. Normal wear


    Links & Description of Contents

    Scheme of Tax Deduction at Source from "Salaries"Income Chargeable under - "Salaries"Income Exempted Under The Head "SALARIES"
    1 - Section 192 Provisions on Taxable Income
    2 - Relief When Salary Paid in Arrear or Advance
    3 - Claim of Deduction of Interest u/s 24 (b)- Income from House Property
    4 - Due dates for payment of TDS
    5 - Interest, Penalty & Prosecution for Failure to Deposit Tax Deducted
    6 - Certificate for Tax Deducted (Section 203)
    7 - TRACES
    8 -Furnishing Particulars pertaining to perquisites
    9 - Mandatory Quoting of PAN and TAN
    10 - TDS on Income from Pension
    11 - Income Chargeable Under the Head "Salaries"
    12 - Definition OF "Salary"
    13 - Perquisite - Rent Free Accomodation & Motor car provided by the Employer
    14 - Perquisite - Gas, electricity & water for household consumption
    15 - Interest free or concessional loans
    16 - Value of Subsidized / Free food / non-alcoholic beverages
    17- Transfer Grant Allowance
    18 - Medical Reimbursement by the Employer
    19 - Leave Travel Concession (LTC)
    20 - Death-cum-Retirement Gratuity
    21 - Commutation of Pension
    22 - Leave Encashment
    23- Retrenchment Compensation
    24 - Amount received on voluntary retirement
    25 - Sum received under a Life Insurance Policy
    26 - Payment from a Provident Fund
    27 - House Rent Allowance
    28 - Pension to Gallantry Awarded
    29 - Medical Treatment provided by Employer
    30 - Entertainment Allowance
    31 - Professional Tax











  • HomeContactPrivacy