📌 Table of Contents
- What Are Perquisites in Salary?
- Types of Perquisites
- Taxability of Perquisites Under Section 17(2)
- Valuation Rules for Different Perquisites
- Tax-Exempt Perquisites
- Reporting Perquisites in Form 12BA
- Employer’s Responsibility for TDS on Perquisites
- How to Declare Perquisites in ITR
- Common Perquisite-Related Mistakes to Avoid
- Tips to Minimize Tax on Perquisites
- Conclusion
- FAQs
🔹 1. What Are Perquisites in Salary?
Perquisites, also known as fringe benefits, are additional benefits or facilities provided by the employer to the employee in addition to the basic salary or allowances. These benefits can be either monetary or non-monetary in nature and may or may not be taxable depending on their type.
🔹 2. Types of Perquisites in Salary
Perquisites in Salary are broadly classified into three categories:
| Category | Description | Example |
|---|---|---|
| Taxable Perquisites | Fully taxable under the Income Tax Act | Rent-free accommodation, motor car for personal use |
| Tax-free Perquisites | Exempt under specific sections or limits | Laptops for official use, medical insurance premium paid by employer |
| Perquisites Taxable in Specified Cases | Taxable only under certain circumstances | Interest-free loans, club memberships |
🔹 3. Taxability of Perquisites Under Section 17(2)
According to Section 17(2) of the Income Tax Act, perquisites are considered part of “Income from Salary” and are taxable unless specifically exempted.
They are taxable under the following conditions:
- Provided by the employer to the employee
- Arising from an employment contract
- Provided either in cash or in kind
🔹 4. Valuation Rules for Different Perquisites
The CBDT has prescribed rules for valuation of different perquisites under Rule 3 of Income Tax Rules. Here’s a quick summary:
| Perquisite | Valuation Method |
|---|---|
| Rent-free accommodation | Based on population of city and salary of employee |
| Motor car provided for personal use | ₹1,800 to ₹2,400 per month plus fuel and driver cost |
| Interest-free loan | Difference between SBI rate and interest charged |
| Education provided to employee’s children | Free up to ₹1,000/month per child (for 2 children) |
| ESOPs | FMV on date of exercise minus exercise price |
🔹 5. Tax-Exempt Perquisites
Some perquisites are exempt from tax, either fully or up to a certain limit:
- Use of laptops and computers for official work
- Free refreshments during office hours
- Medical insurance premiums paid by employer (under Section 17(2))
- Employer contribution to NPS (up to 10% of salary)
- Telephone (landline/mobile) provided for official use
🔹 6. Reporting Perquisites in Form 12BA
Employers are required to disclose the value of perquisites in a separate statement called Form 12BA, which accompanies Form 16.
| Component | Description |
|---|---|
| Form 12BA | Lists each taxable perquisite provided during the year |
| Form 16 | Consolidated salary and TDS statement |
Employees must refer to Form 12BA while filing ITR and ensure that the perquisites match with their salary slips and TDS statements.
🔹 7. Employer’s Responsibility for TDS on Perquisites
Employers must:
- Include perquisite value in salary for TDS computation
- Deduct tax monthly as per slab rates
- Report same in quarterly TDS returns (Form 24Q)
- Issue Form 16 and 12BA at the year end
🔹 8. How to Declare Perquisites in ITR
When filing ITR (ITR-1, ITR-2 or ITR-3 depending on other income):
- Include perquisite values from Form 12BA under ‘Salary’
- Declare perquisites under “Gross Salary” along with basic and allowances
- Validate AIS and Form 26AS data for TDS credit reconciliation
📊 Salary Breakdown Including Perquisites
Basic Salary - 40%
HRA - 20%
Special Allowances - 20%
Perquisites (Car, Rent) - 15%
Bonus/Other Payments - 5%(This breakdown is indicative and can vary based on employment contract.)
🔹 9. Common Perquisite-Related Mistakes to Avoid
- Not reporting car perquisites
- Ignoring ESOP taxation
- Failing to match Form 12BA and salary slips
- Declaring tax-free perquisites under taxable income
- Incorrect value of rent-free accommodation
🔹 10. Tips to Minimize Tax on Perquisites
✅ Opt for tax-free or partially exempt perquisites like laptops or internet
✅ Use NPS contributions or employer-sponsored insurance for tax savings
✅ Structure your CTC with a higher portion of reimbursable expenses
✅ Keep receipts and logs for fuel, vehicle use, etc.
🔚 11. Conclusion
Perquisites form a significant portion of the salary structure in high-paying jobs. While they add real value to an employee’s take-home package, incorrect reporting or tax handling can result in penalties and scrutiny.
Always cross-verify Form 12BA, consult your employer or tax advisor, and plan your perquisites for maximum tax efficiency.
❓ 12. FAQs
- What is the meaning of perquisites in salary?
A perquisite is a benefit given by the employer in addition to regular salary, such as rent-free housing, car usage, etc. - Are perquisites taxable?
Yes, most perquisites are taxable under Section 17(2), unless specifically exempted. - Which perquisites are tax-free?
Laptops for official use, phone bills, medical insurance, employer NPS contributions. - What is Form 12BA?
A detailed form provided by the employer listing the value of perquisites for the financial year. - How are perquisites valued?
Valuation depends on the type of perquisite and is governed by Rule 3 of the Income Tax Rules. - Is car perquisite fully taxable?
Yes, unless the car is used only for office work with proper logs maintained. - How can I save tax on perquisites?
Choose exempt benefits, maintain records, and optimize CTC structure. - Where do I report perquisites in ITR?
Under the “Salary” section while declaring gross salary. - Do I have to pay extra tax for perquisites?
It depends on your slab. TDS is usually deducted by the employer on their value. - Is housing rent paid by employer taxable?
Yes, unless rent-free accommodation is provided within prescribed limits and conditions.
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