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 :
- Basic Salary ;
- Dearness Allowance, or Dearness Pay if it enters into the computation of
superannuation or retirement benefit of the employees;
- Bonus ;
- Commission ;
- Fees ;
- All other taxable allowances (excluding the portion not taxable ); and
- 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
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