Perquisites

Value of any accommodation provided to the assessee by his employer at a concessional rate

Amount paid by the employer which would have been payable by the employee.

For example, Salary paid to the servant of an employee by the employer

Amount payable by the employer directly or indirectly to effect an assurance on the life of the assessee or to effect a contract for an annuity, other than the payment made to RPF, approved superannuation fund, or deposit-linked insurance fund.

However, insurance premium paid by the employer on behalf of the employee in group insurance scheme, employee state insurance scheme, and fidelity insurance scheme is not regarded as perquisite.

If an employer allows the employees or their family members to use the movable assets owned or hired by the employer, the value of such facility shall be taxable as perquisite in the hands of all employees. Further, if employers transfer the used assets to employees at concessional rates or for free, the value of savings enjoyed by employee is charged to tax as perquisite. In both the cases above, the taxable value is reduced by the amount, if any, paid by the employee

For example, Car, Mobile phone, laptop, etc.

The credit card facility provided by the employer to the employee or his family member for personal purposes is a taxable perquisite. The value of such perquisite shall be the amount incurred by the employer regarding such facility. If the card is used for official purposes only, no taxable perquisite shall arise in the hands of the employee.

However, for this purpose, the employer shall maintain proper documents to prove the nature and purpose of the expense

When an employer allots shares to an employee under the ESOP scheme, free of cost or at a concessional rate, it is taxable as perquisite. The value of such perquisite shall be its market value as on the specified date as reduced by the amount recovered from the employee. When shares are transferred, the gains arising therefrom shall be taxable under the head 'Capital Gains'. The taxability of ESOP is deferred in the hands of employee of the eligible start-up.

Eligible start-up shall deduct tax from income arising in the nature of perquisites from ESOPs within 14 days from the happening of any of the following events (whichever is earlier):

1. On the expiry of 48 months from the end of the Assessment year in which securities are allotted under ESOPs;
2. From the date the assessee ceases to be an employee of the organization; or
3. From the date of sale of securities allotted under ESOP.

If the employer provides reimbursement to the employees to meet the cost of medical expenditure incurred by them, it shall be charged to tax as perquisite.

However, if the employer pays for the medical treatment of the employee or his family members in any approved hospital in India, it shall be treated as a tax-free perquisite. If the medical facilities are provided outside India, it shall be chargeable to tax only if the amount of expenditure exceeds the limit prescribed by the RBI

If Car is used for official purpose

If the car or any other automotive conveyance is used by the employee for official purposes only, the taxable value of perquisite shall be nil provided that the employer maintains the complete log of the journey undertaken by the employee and gives a certificate to the effect that the expenditure was incurred for official purposes.

Car facility between office and residence

An employer may provide his car or provide reimbursement to an employee for using his own car for commuting between the office and residence. Such facility is not taxable in the hands of employees and is treated as a tax-free perquisite.

Conveyance facility to judge

Conveyance facility provided to High Court Judges, Supreme Court Judges, and to serving Chairman/members of UPSC is not chargeable to tax.

Petty loans

Nothing is taxable in the hands of employees if the amount of loan is up to Rs. 20,000 in aggregate. If the original loan was above the threshold limit but subsequently it is reduced below Rs. 20,000, it shall not be considered as a petty loan. The interest on such loan, even if it falls below Rs. 20,000, shall be calculated in accordance with the method prescribed above.

If an employee receives more than one loan (with each loan amount of less than Rs 20,000), the aggregate of all loans he receives should be considered to decide if it's a petty loan or a taxable one. If the employee takes loan in multiple trenches which in the aggregate exceeds Rs 20,000, the entire amount shall be considered for computation of tax.

Loan for medical treatment

Any borrowings from the employer for the medical treatment of specified diseases (i.e., cancer, tuberculosis, AIDS, etc.) in approved hospitals is not taxable. However, this exemption will not be available in respect of a loan that has been reimbursed to the employee by an insurance company under any medical insurance scheme.

Where medical insurance reimbursement is received, the taxable value shall be calculated on the amount reimbursed by the Insurance co. but not repaid against the outstanding loan. The value of perquisite shall be calculated from the date of reimbursement.

Illustration: An employee takes a loan of Rs. 2 lakhs for medical treatment, but later gets insurance money of Rs. 50,000 in respect of such treatment, the exemption will be available only in respect of Rs. 1.5 lacs. The taxable value will be computed at the prescribed rates for the balance amount of Rs. 50,000.

Medical facilities in India

Medical facilities provided in India to an employee or his spouse, children, dependent parents, dependent brothers, or dependent sisters shall not be deemed as perquisite in the following cases:

1. If medical treatment is provided in a hospital maintained by the employer.
2. If medical treatment is provided in a Government hospital or in the prescribed hospitals.
3. If medical treatment is provided in an approved hospital for the treatment of prescribed disease.
4. If group medical insurance is provided by the employer.

Medical facilities outside India

Any sum incurred by the employer for the medical treatment of an employee or his spouse, children, dependent parents, dependent brothers, or dependent sisters outside India shall not be taxable as perquisite if it doesn't exceed the limit prescribed by the Reserve Bank of India. Similarly, the sum incurred on the stay of an employee or any family member or any attendant, who accompanies the patient for treatment outside India, shall not be taxable as perquisite if it doesn't exceed the limit permitted by the RBI.

The cost of travelling of an employee or any of his family members or any attendant, who accompanies the patient, for treatment outside India shall not be taxable as perquisite if the gross total income of the employee without including therein the expenditure on travelling doesn't exceed such amount as may be prescribed.

Health Insurance

Any insurance premium paid by the employer to effect or to keep in force an insurance on the health of his employee under a scheme approved by the Central Government or IRDAI is fully exempt from tax.

Any reimbursement provided by the employer in respect of any insurance premium paid by the employee to effect or to keep in force an insurance on his health or on the health of spouse, dependent parents, and dependent children under a scheme approved by the Central Government or IRDAI is also exempt from tax.

Personal Accident Policy

Where an employer takes out an accident policy, the premium paid in respect of such policy shall be exempt from tax. However, if the premium for the accident policy is paid by the employee and reimbursed by the employer, it would be taxable as perquisite

Tea, snacks, or non-alcoholic beverages

Tea, snacks, or non-alcoholic beverages provided by employers during office working hours is not taxable in the hands of employees.

Food

Free meal provided by the employer to its employees during working hours at the office or business premises is not chargeable to tax as perquisite in the hands of the employee if the cost per meal doesn't exceed Rs. 50.

Free food in remote areas or in an offshore installation

Free food provided in remote areas or in an offshore installation is not chargeable to tax. Remote areas shall mean an office or place located at least 40 kms away from a town having a population not exceeding 20,000 based on the latest published census.

Meal Vouchers

Some employers offer meal coupons in lieu of certain portion of the salary to save taxes for their employees, i.e., Sodexo meal coupons. These food coupons should ideally be used for meals during office hours only to get income tax benefits.

However, since there is no strict check on the actual usability of meal coupons so these meal coupons end up being tax-free even if these are utilized at hypermarkets/local grocery stores

Official tour

Nothing is charged to tax if an employee goes on an official tour and the expenses thereof are met by the employer.

Holiday facility maintained by the employer

If the holiday facility is maintained by the employer and is uniformly available to all employees, the value of the facility is deemed as nil

Health or sports club

If the employer uniformly provides health club or sports facilities to all employees, the value of such benefit shall not be chargeable to tax as perquisite in the hands of employees.

Initial club membership fee

Initial membership fee paid by the employer for acquiring corporate or institutional membership shall not be charged to tax provided such benefit does not remain with a particular employee after cessation of employment.

Club expenses for official purposes

When an employer pays for or reimburses any club expenses incurred wholly and exclusively for business purposes, the value of perquisites shall be nil