Salary Income – Meaning of term Perquisite and Taxability

Dictionary meaning

1. A gain or profit incidentally made from employments in addition to regular salary or wages,especially one of a kind expected or promised

2. Casual emolument or benefit attached to an office or position in addition to salary or wages

3. Anything left over that a servant or other has by custom a right to keep

4. A tip expected upon some occasion

5. Something regarded as a falling to one by right

PERQUISITES signify some benefit in addition to the amount that may be legally due by way of contract for services rendered.

Meaning under income tax act

Section 17(2) gives an inclusive definition of perquisite,as including:

a. The value of rent –free accommodation provided to the assessee by his employer [sec.17(2)(i)] ;

b. The value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer [ Sec.17(2)(ii)];

c. The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases :

i. By a company to an employee who is a director thereof;

ii. By a company to an employee,being a person who has substantial interest in the company;

iii. By an employer (including a company) to an employee to whom provisions  of (i) and (ii)above do not  apply and whose income under the head “Salaries” exclusive of the value of all benefits or amenities not provided for by way of monetary benefits, exceed Rs.50,000[sec.17 (2)(iii);

d. Any sum paid by the employer in respect of any obligation which but for such payment have been payable by the assessee [sec.17(2)(v)];

e. Any sum payable by the employer, whether directly or through a fund other than a recognised provident fund or approved superannuation fund or a deposits-linked insurance fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity [sec.17(2)(v);

f. The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employeror former employer, free of cost or at concessional rate to the assessee [sec.17(2)(vi)];

g. The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee to the extent it exceed one lakh rupees[sec.17(2)(viii)]; and

h. The value of any other fringe benefit or amenity as may be prescribed [sec.17 (2)(viii)].

Following table shows what all perquisites are chargeable / not chargeable to tax:

List of taxable perquisite	When these perquisite are not taxable
Furnished / unfurnished house without rent or at concessional rent	1.    If provided in remote area 2.    Hotel accommodations for 15 days on account of transfer 3.    Option in case of accommodation provided in new place of work 4.    High court judge 5.    Supreme court judge 6.    Union minister 7.    Leader of opposition in parliament
Service of sweeper, gardener, watchman, or personal attendant	Not taxable in case of non-specified employee
Supply of gas, electricity or water for house hold purposes	Not taxable in case of non-specified employee
Educational facility to employees family members	Not taxable in case of non-specified employee
Leave travel concession	1.    Not taxable twice in a block of 4 years 2.    Not taxable in case of non-specified employee
Amount paid by an employer iro any obligation which otherwise would have been payable by employee	Income tax borne by employer
Amount payable by an employer, directly or indirectly, to effect an assurance on the life of employee or to effect a contract of an annuity	Contribution to recognized provident fund
Interest free / concessional loan	1.    Aggregate amount of original loan does not exceeds Rs. 20,000 2.    Purpose of loan taken is Medical treatment
Proving use of movable assets	Use of computer / laptop
Transfer of movable assets
Medical facility	In some cases medical facility is not taxable
Car or any other automotive conveyance	1.    Not taxable in case of non-specified employee 2.    Conveyance facility between office and residence
Transport facility by a transport undertaking	1.    Provided by airline or railways 2.    Not taxable in case of non-specified employee
Free food and beverage	1.    Provided in working hours in remote area or offshore installations 2.    Snacks in working hours 3.    Meals in office hours if Cost To Employer is not more than Rs 50 per meal
Travelling, touring accommodation
Gift or gift voucher	Gift upto Rs. 50000
Credit card
Club
Tax of an employee paid by his employer	Tax on non-monetary perquisites
Value of an specified security / sweat equity shares   allotted or transferred to an employee or former employee
Employers contribution towards superannuation fund in excess of specified amount	Not chargeable to tax if employer’s contribution is Rs. 100,000 or less per year
Perquisite received by a teacher / professor from SAARC Member States
Any other benefit or amenity, service, right or privileges	Telephone / mobile phones are not chargeable to tax