Perquisites (Section 17(2)):
Perquisite is defined as a benefit or casual emolument (payment) attached to an office or position and is received by a person in addition to his/her salary or wages. There are taxable perquisites and tax-free perquisites or perks. The taxability of perquisites varies depending upon their nature.
Perquisite Tax under Income Tax Act
Perquisites include the provision of medical facilities, official vehicle, housing allowance, etc. that offered by employers to their employees. Some of these could attract perquisite tax since these are made available to you by your company in addition to your salary.
A lot of benefits (perquisites) which come in addition to an individual’s salary are grouped under perks (perquisites). These components are charged to tax separately from the employer’s account so as to maintain transparency & accountability.
According to the Finance Act, 2005, perquisites are taxed by the govt in case these perks (perquisites) are provided or are deemed to be provided by employers to employees. The rate at which perquisites are charged to tax is 30% of the value of fringe benefits. The perquisite tax is paid by the employer who furnishes these perquisites to employees. It can be a firm, a company, an AOP (Association of Persons) or BOI (Body of Individuals).
Taxable Perquisites and Tax Free Perquisites
Different perquisites under section 17(2) chargeable to tax are provided in below table along with the list of tax-free perquisites.
|S.No||Taxable Perquisites||When these perquisites are not taxable (Tax-free Perquisites)|
|1.||Furnished/unfurnished house without rent or at concessional rent.||
|2.||Service of a sweeper, gardener, watchman or personal attendant.||Not taxable to a non-specified employee.|
|3.||Supply of gas, electricity or water for household purposes.||Not taxable to a non-specified employee.|
|4.||Education facility to the employee’s family members.||Not taxable to a non-specified employee.|
|5.||Leave travel concession.||
|6.||Amount paid by an employer in respect of any obligation which otherwise would have been payable by the employee.||Tax borne by an employer on non-monetary perquisites of employees.|
|7.||Amount payable by an employer directly or indirectly to effect a life assurance of an employee or to effect a contract for an annuity.||Contribution to recognized PF (Provident Fund)|
|9.||Providing use of a movable asset||
|10.||Transfer of movable asset||–|
|12.||Car or any other automotive conveyance.||
|13.||Transport facility by a transport undertaking.||
|14.||Free food and beverage||
|15.||Travelling, touring accommodation.||–|
|16.||Gift or gift voucher||Gift is in kind up to Rs. 5000 is exempt.|
|17.||Credit card||Initial fees payable for obtaining corporate membership.|
|18.||Club||Health Club or Sports Club facility if a few conditions are satisfied.|
|19.||Tax of employee paid by employer||Tax on non-monetary perquisite paid by an employer is exempt.|
|20.||Value of any specified security/sweat equity shares transferred or allotted to an employee or former employee.||–|
|21.||Employer’s contribution towards superannuation fund in excess of Rs. 1 lakh per year.||Not chargeable to tax up to Rs. 1 lakh per year.|
|22.||Perquisites received by a teacher/professor from the SAARC Member States.||Not taxable for 2 years.|
|23.||Any other benefit or amenity, service, right or privilege.||Telephone/mobile is not chargeable to tax.|