1. 💼 What Are Perquisites?
Perquisites, also known as perks, are non-monetary benefits or facilities provided by an employer to an employee, in addition to salary or wages. These may include company-provided housing, cars, club memberships, stock options, etc.
As per Section 17(2) of the Income Tax Act, perquisites form part of an employee’s salary and may be taxable, exempt, or partially taxable depending on their nature.
2. 📂 Types of Perquisites
Perquisites are mainly classified into the following categories:
| Type | Examples |
|---|---|
| Monetary Perks | Reimbursement of bills, allowances, bonuses |
| Non-Monetary Perks | Rent-free accommodation, car facility |
| Fringe Benefits | ESOPs, stock options, club memberships |
| Tax-Free Perquisites | Medical reimbursement (conditions apply) |
3. ⚖️ Classification: Taxable, Exempt & Concessional
| Nature of Perquisite | Examples | Taxability |
|---|---|---|
| Fully Taxable | Rent-free accommodation, motor car usage | 100% taxable as salary |
| Tax-Free (Subject to Limits) | Medical reimbursement, gifts ≤ ₹5,000 | Fully exempt if within limit |
| Concessional Taxation | Interest-free loan from employer | Taxed on perquisite value |
4. 📏 Valuation of Perquisites – Income Tax Rules
Valuation is done based on the rules laid out in Rule 3 of the Income Tax Rules:
| Perquisite Type | Valuation Method |
|---|---|
| Rent-Free Accommodation | 15% of salary or actual rent paid (whichever is lower) |
| Car Facility | Based on engine capacity & driver availability |
| Interest-Free Loans | Difference between SBI rate & charged rate |
| Club Memberships | Full value borne by employer |
| Education Facilities | Value of benefit exceeding ₹1,000/month per child |
5. 🧮 Perquisite Tax Calculation with Examples
Example 1 – Car Facility:
| Particulars | Value (₹) |
|---|---|
| Engine capacity ≤ 1.6L with driver | ₹1,800/month |
| Perquisite value for full year | ₹21,600 |
Example 2 – Rent-Free House in Metro City:
| Particulars | Value (₹) |
|---|---|
| Basic Salary | ₹6,00,000 |
| DA (forming part of retirement) | ₹60,000 |
| Total Salary | ₹6,60,000 |
| 15% of Salary (Valuation Rule) | ₹99,000 |
6. 📄 Reporting Perquisites in Form 16 & ITR
- Perquisites are disclosed in Part B of Form 16 under “Value of Perquisites u/s 17(2)”.
- They must also be reflected in ITR under the Salary section.
- Tax on non-monetary perks is borne by the employer (if opted) under Sec 192(1A).
7. 📘 Tax Planning with Perks – Tips for Employees
- Choose perks that are partially exempt or tax-friendly, like:
- Education expenses
- Gift vouchers under ₹5,000
- Health check-ups covered by the company
- Avoid perks like rent-free homes unless you get high housing benefit.
- Maintain documentary proof of employer-perk valuation.
8. 📊 Types of Perquisites & Taxability
| Perquisite | Taxability | Tax Valuation Method |
|---|---|---|
| Rent-Free Accommodation | Taxable | % of salary or rent paid |
| Motor Car Facility | Taxable | Fixed monthly amount |
| Medical Reimbursement | Exempt up to limit | ₹15,000 (now replaced by Health allowance) |
| Interest-Free Loans | Taxable | SBI lending rate-based |
| Mobile/Internet Bill | Exempt if used for work | NA |
| Gifts from Employer | Exempt up to ₹5,000 | NA |
| Free/Concessional Education | Taxable | Beyond ₹1,000/month |
9. 📌 Real-Life Examples
Case 1: IT Employee Receiving ESOPs
→ Taxable as perquisite on exercise + capital gains on sale.
Case 2: Government employee availing official residence
→ Exempt for certain class of government employees.
Case 3: Bank employee receiving interest-free loan
→ Taxed on differential interest vs. SBI rate.
10. ❌ Common Errors in Perk Declaration
- Not declaring rent-free accommodation correctly
- Missing interest-free loan perquisite calculation
- Not reviewing Form 16 entries
- Claiming exemption for taxable perks
11. 🔗 Internal & External Links
Internal Links from TaxCrux :
- Learn about Basic Salary
- Know more about Special Allowances
- Understand Leave Encashment
- Guide on Bonus and Incentives
- Overview of Leave Travel Allowance
External Reference:
- Read valuation rules under Rule 3 of Income Tax
❓ FAQs
- • What are perquisites in income tax?
Perquisites are non-cash benefits provided by employers that are taxed under salary. - • Are perquisites taxable in the new regime?
Yes, most perquisites are taxable in both old and new regimes. - • Can gifts from employers be tax-free?
Yes, if total value during a financial year is within ₹5,000. - • Is free accommodation given by employer taxable?
Yes, except for certain government employees. - • What is the tax treatment for employer-provided cars?
Based on engine capacity and driver availability under Rule 3. - • Are ESOPs considered perks?
Yes, they are taxable at the time of exercise. - • Is medical insurance provided by employer taxable?
No, if it’s part of a group health insurance scheme. - • How to report perquisites in ITR?
Declare the value as per Form 16 under Salary Income section. - • What proof do I need to justify perquisites?
Salary slips, employer declaration, and valuation sheets. - • Can perquisite tax be paid by employer?
Yes, under Sec 192(1A), employer can bear the tax on non-monetary perks.
Media-
How to File your Income Tax Return (ITR) in 10 minutes | Easy Filing Process of self prepared ITR |
