Taxability of Perquisites – Taxable and Tax Free Perquisites

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.	Not chargeable to tax if provided in a “remote area”. Hotel or guest house accommodation for 15 days can be provided immediately after transfer at the new location as a tax-free perquisite. If an employee transferred and housing facility is provided to him at the new location, for a period of 90 days immediately after transfer only one house is chargeable to tax and the other one will be tax-free. Further, a rent-free house is not taxable if it is provided to a High Court Judge, Union Minister, Supreme Court Judge, Leader of Opposition in Parliament, an official in parliament and serving chairman and members of UPSC.
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.	Not taxable twice in a block of 4 years. Not taxable to a non-specified employee.
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)
8.	Interest-free/concessional loan.	The perquisite is not taxable if an aggregate amount of original loan does not exceed Rs. 20,000. Loan for medical treatment is not taxable subject to a few conditions.
9.	Providing use of a movable asset	Providing use of laptop/computer in any case.
10.	Transfer of movable asset	–
11.	Medical facility	Medical facility provided in a owned hospital or maintained by the employer is not taxable. Medical insurance provided by an employer in a Govt hospital or approved hospital or a private hospital is not chargeable to tax. Health insurance premium paid or reimbursed by the employer for providing a medical facility in India is not chargeable to tax up Rs. 15000 in aggregate per assessment year. Expenditure on medical treatment outside India is not taxable if a few conditions are satisfied. Further, the perquisite in respect of medical facility is not taxable if the employee is a non-specified employee.
12.	Car or any other automotive conveyance.	Not Taxable if employee is a non-specified employee Conveyance facility between office and residence is not taxable. Conveyance facility to High Court judges, Supreme Court judges and serving Chairman and members of UPSC, is not taxable.
13.	Transport facility by a transport undertaking.	Not taxable if it is provided by an airline or the railways. Not taxable if the employee is a non-specified employee.
14.	Free food and beverage	Food and non-alcoholic beverages provided in working hours in the remote area or in an offshore installation are exempt from tax. Tea, coffee or non-alcoholic beverages and snacks in working hours are tax-free perquisites. Meals to the employer in office hours is not taxable if the cost is Rs. 50 or less per meal.
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.