|
|
Income
under the head of Salaries :
What
are perquisites :
A perquisite
is any casual emolument, fee or profit attached to an office or
position in addition to the salary or wages. In other words, perquisites
are the benefits in addition to normal salary to which the employee
has a right by virtue of his employment.
Definition
of perquisite as per Section 17(2) of the Income-tax Act.
- Section
17(2) of the Income-tax Act, 1961 gives an inclusive definition
of perquisite. As per this Section perquisite includes:
- the
value of rent-free accommodation provided to the assessee by his
employer;
- the
value of any concession in the matter of rent respecting any accommodation
provided to the assessee by his employer;
- the
value of any benefit or amenity granted or provided free of cost
or at concessional rate in any of the following cases:
-
by a company to an employee, who is a director thereof;
-
by a company to an employee being a person who has a substantial
interest in the company:
-
by any employer to an employee whose income under the head 'Salaries'
exceeds Rs.24000 excluding the value of non monetary benefits
or amenities.
- any
sum paid by the employer in respect of any obligation which, but
for such payment, would have been payable by the assessee; and
- any
sum payable by the employer whether directly or through a fund,
other than a recognised provident fund or EPF, to effect an assurance
on the life of the assessee or to effect a contract for an annuity.
Tax
free perquisites:
- Medical
facility: Any medical facility provided by the employer to the
employee and his family members in a hospital, dispensary or a
nursing home maintained by the employer.
- Medical
reimbursement: Any medical expenses reimbursed by the employer
for the treatment of his employee and his family members in an
approved Hospital subject to maximum of Rs.10,000 per annum upto
assessment year 1998-99. The limit of Rs.10,000 has been raised
to Rs.15,000 per annum w.e.f. assessment year 1999-2000.
- Refreshments:
Any refreshment provided to the employees during office hours
at the place of work.
- Subsidised
lunch or dinner provided by the employer: When lunch or dinner
is provided at subsidised rates i.e. the employer charges some
amount for the lunch or dinner then only it is tax-free perquisite.
- Recreational
facilities: Any recreational facility provided to a group of employees
by the employer is not taxable. These should not be resricted
to only a few employees.
- Telephone
Bills: Telephone bills of the telephone installed at the residence
of the employee for offiicial purposes , if paid/reimbursed by
the employer, is not a taxable perquisite even if such telephone
is used for official as well as personal benefit of the employee.
- Goods
sold by the employer at a concessional rate to his employees:
When the employer sells the goods being manufactured by him to
his employees at concessional rates, it is not a taxable perquisite
e.g. a company, manufacturing fans, sells the fans to its employees
at concessional rates, the concession given to the employees shall
not be taxable. However, if the employer sells other goods to
the employees at a value lower than the market value of the goods,
the benefit given to the employee is taxable.
- Insurance
: Any portion of the premia paid by an employer to effect or to
keep in force an insurance on the health of the employee under
an approved scheme. This covers reimbursement of the expense incurred
by the employee for schemes approved under section 80D also.
- Loans
to employees: If the employer gives a loan to an employee either
without interest or at a concessional rate of interest for construction
or purchase of a house or for a conveyance, then the benefit of
interest availed of by the employee would not be taxable.
- Transportation
facilities: If an employer, engaged in the business of transport,
provides transport facilities to its employees and his family
members either free of cost or at concessional rate then it would
not be a taxable perquisite. For example, free passes provided
by the Indian Railways to its employees are not taxable in the
hands of the employees.
- Perquisites
provided outside India: Perquisites provided by the Government
to its employees, who are citizen of India for rendering services
outside India, are not taxable.
- Training
of employees: Any expenditure incurred by the employer, for providing
training to the employees or by way of payment of fees of refresher
management courses attended by the employee, would not be taxable
because these enable the employees to perform their services more
efficiently.
- Rent
free House: Rent free official residence and conveyance facilities
provided to a Judge of a High Court/Supreme Court is not a taxable
perquisite.
- Residence
to officials of Parliament etc.: Rent free furnished residence
(including maintenance thereof) provided to an officer of the
Parliament, a Union Minister or Leader of Opposition in Parliament,
is not a taxable perquisite.
- Employers
contribution: Employers contribution to pension, deferred annuity
scheme and staff group insurance scheme of employees, is not a
taxable perquisite in the hands of employees.
Medical
Facilities [Proviso to Section 17(2)]
Expenditure
on medical treatment in India
- In
certain cases medical facilities are treated as tax free. When
an employee is granted medical facilities or his family members
are granted medical facilities in any hospital, dispensary or
nursing home maintained by the employer ,in such a situation medical
perquisites are treated as tax-free perquisites.
- In
case of reimbursement by the employer of an amount actually spent
by the employee for obtaining medical treatment for himself or
his family members is a tax free perquisites up to a ceiling of
Rs. 10,000/- p.a. This ceiling has been raised to Rs.15,000/-
from the assessment year 1999-2000. However in the following cases
medical treatment of the employee and his family members shall
be fully tax free even if the amount paid or reimbursed exceeds
these specified limit of Rs.15,000/- as mentioned above :
- (i)
Actual expenditure incurred by employee on himself or his
family's medical treatment in a Government Hospital or in
a hospital approved by the Government for its employees;
- (ii)
Expenditure incurred by the employee on himself or his family
member's medical treatment in respect of prescribed diseases
in a hospital approved by the Chief Commissioner of Income
Tax. To avail the benefit under this Section the employees
has to attach, alongwith his return of income, a certificate
from the hospital specifying the disease for which medical
treatment was required and the receipt for the amount paid
to the hospital.
- Any
insurance premium for insurance of the health of the employees
under a scheme approved by the Central Government. Any reimbursement
by the employer of any insurance premium paid by the employee
for insurance of his health or her spouse or dependent parents
or dependent children under a scheme approved by the Central Government
is also a tax-free perquisite.
Expenditure
on medical treatment outside India
- In
certain situations expenditure incurred by the employer on treatment
of the employee or his family members outside India is treated
to be a tax free perquisite.
- Expenses
on medical treatment of the employee or any member of his family
incurred outside India shall be tax free perquisite to the extent
permitted by Reserve Bank of India.
- Expenses
incurred on the attendant who accompanies the patient in connection
with the treatment of the employee shall also be tax-free perquisite
to the extent admitted by Reserve Bank of India.
- Expenses
relating to traveling of the patient and one attendant who accompanies
the patient shall be tax-free perquisite in the case where the
gross total income of the patient does not exceed Rs. 2,00,000/-
(Rs. Two Hundred Thousands). In other words, if the gross total
income exceeds Rs. 2,00,000/- the traveling expenses of the patient
as well as the attendant shall become a taxable perquisite.
Leave
Travel Concession
- Many
employers grant the facility to the employees and their families
of travelling to their home town or any other place in India in
a block of two or four years. This perquisite on account of Leave
Travel Concession if actually availed by the employee is exempt
from Income Tax subject to the limits of expenses prescribed.
However, in case the Leave Travel Concession is encashed by the
employee without performing the actual journey the entire amount
received by the employee would be taxable in the relevant previous
year.
- LTC
given to an employee and his family in connection with his proceeding
to any place in India after retirement from service or after the
termination of his service is exempt subject to conditions laid
down as in the case of Central Government employees.
Perquisites
on account of accommodation provided by the employer
Value
of rent free unfurnished accommodation
- For
calculating the perquisite for rent free accommodation the employees
have been divided into three categories viz. government employees,
semi-government employees( which cover the employees of Reserve
Bank of India, statutory corporation) and other employees.
- The
factors which determine the value of rent free accommodation are
the category of employees, the location of the accommodation,
the fair rental value of the accommodation and the salary of the
employee.
- Fair
rental value is the rent which a similar accommodation would realise
in the same locality or the municipal valuation whichever is higher
[Explanation 2 to Rule 3(a)]. If the accommodation is owned by
the employer, then the maintenance expenses of the garden, salary
of the gardener and the maintenance expenses of the swimming pool
are included in the FRV
- Salary
for the calculating the value of the rent free accommodation includes
basic salary, bonus, fees and commission, dearness allowance,
taxable allowances, income tax and professional tax of the employee,
if paid by the employer.
- In
the case of government employees, the value of perquisite of a
rent free unfurnished accommodation is as per the rules framed
by the government.
- In
the case of semi-government employees in respect of properties
located anywhere in India, the value of perquisite is 10% of salary
or Fair Rental Value of accommodation, whichever is less.
- In
the case of other employees, in respect of properties located
at Delhi, Mumbai, Calcutta, and Chennai,
-
if the fair rent is less than 10% of the salary, fair rent is
taken as the taxable value of the perquisite.
- if
the fair rent is 10% of salary or more but not more than 60% of
salary, 10% of salary is taxable value of the perquisite.
- if
the fair rent exceeds 60% of salary, fair rent minus 50% of salary
is taxable.
Value
of rent free furnished accommodation:
In
case the employee has been provided rent free furnished accommodation,
the valuation of the perquisite is determined by presuming that
the accommodation is unfurnished. The value of the perquisite is
determined as shown in the paragraph for calculating value of
rent free unfurnished accommodation. After calculating the value
in this fashion, 10% of the original cost of furniture is added
if the furniture is owned by the employer or if the furniture is
hired by the employer, actual hire charges payable are added to
the value of rent free unfurnished accommodation.
Value
of accommodation provided at concessional rate
- Where
an accommodation has been provided by the employer to his employee
and the employer charges a concessional rent from him, then it
is an accommodation provided at a concessional rate and the value
of the concession shall be the taxable perquisite. The value of
this perquisite shall be determined in the following manner:
- Assume
that the accommodation provided is a rent free accommodation (which
may be furnished or unfurnished) and value the same as per the
provisions discussed above.
- From
the value determined under step-1, deduct the rent charged from
the employee. The balance amount, if any, shall be the value of
the accommodation provided at concessional rate.
Perquisite
value on account of motorcars or other vehicles provided by the
employer
When
an employee provided motor car by his employer, the value of the
benefit is taxable as perquisite in the hands of the employee. The
rules for valuation of motorcar or other vehicles are explained
as under . The value is determined on the basis of many factors
namely if the car is owned by the employee or the car is owned by
the employer.
- When
the car is owned by the employee and the maintenance and running
expenses are reimbursed by the employer
- When
the car is used wholly for official purposes, the value of the
benefit is not a taxable perquisite.
- When
the car is used for private purposes the actual expenditure reimbursed
by the employer is a taxable perrquisite.
- When
the car is used partly for official and partlly for private purposes
the Assessing Officer can reasonably apportion the amount and
determine the taxable perquisite.
- When
the car is owned or hired by the employer and the maintenance
and running expenses are reimbursed by the employer
- When
the car is used wholly for official purposes, the value of the
benefit is not a taxable perquisite.
- When
the car is used for private purposes only, then the actual expenditure
incurred by the employer on the running and maintenance , normal
depreciation and the salary of the driver if any and hire charges
of the car are taxable as a perquisite.
- When
the car is used partly for official purposes and partly for private
purposes, the reasonable proportion of the sum spent by the employer.
- If
it is difficult to work out such proportion and if the Horse Power
does not exceed 16 and the engines capacity is 1.88 litres, then
Rs. 600/- per month is the taxable perquisite and if the driver
is provided Rs. 300/- is the additional sum of the perquisite
for the driver.
- When
the Horse Power rating exceeds 16, the value of the perquisite
is Rs. 800/- per month and if the driver is provided Rs. 300/-
is the additional sum of the perquisite for the driver.
- When
maintenance and running expenses are met by the employee
- If
the car is used for private purposes then the normal running and
maintenance expenses are taxable perquisites.
- When
the car is used for partly for official and partly for personal
purposes and if it is difficult to work out the proportion
- then
Rs. 200 per month for a car upto 16 Horse Power and enginge capacity
1.88 Litres is the taxable perquisite. If a driver is provided
additional sum of Rs. 300 per month is the taxable perquisite.
-
If the Horse Power rating does exceed 16 and engine capacity exceeding
1.88 litres then Rs. 300 per month is the taxable perquiste. If
a driver is provided additional sum of Rs. 300 per month is the
taxable perquisite.
Perquisite
value for household servants provided by the employer
- When
the employer provides gardner, sweeper ,watchman and domestic
servant to the employee the perquisite value is determined as
under:-
- When
employer pays or reimburse wages of the gardner, sweeper, watchman
and domestic servant to the employee 100% of the wages paid are
taxable as a perquiste.
- In
a situation where an accommodation owned by an employer is provided
to the employee and the services of the gardner are also provided
with the accommodation his services are not a perquisite in the
hands of the employee. But the salary of the gardner is to be
taken into account in determining the fair rental value of the
accommodation.
- Servant
allowance given by the employer to the employee to meet the expenses
on account of the salary of the servant is fully taxable.
Facility
of holiday home for employees
- Where
an employer provides to his employees the facility of a holiday
home maintained by the employer then the value of the facility
is taxable perquisite. The value shall be the market value of
the facility availed. In case the employee is reimbursed the expenses
on account of holiday home for his stay in a hotel the valuation
of the perquisite shall be the actual amount spent by the employer.
|
