About Perquisites Taxation - Part I

Following our discussion last week on allowances, this week we would focus on deductions available for perquisites. The basic difference between perquisites and allowances is that perquisites are non-cash benefits received from employer. The employee can only enjoy the benefit of the same and not receive any cash for it.

The details of perquisites benefits available under Sec 17 are as follows: 

Details of sub section under Section 17	Details of Perquisites	Taxable value of Perquisites
2 (i)(ii)	Unfurnished rent free accommodation	A. If House Property is owned by the employer: ·   15% of salary, if population of city where accommodation is provided exceeds 25 lakhs as per 2001 census ·   10% of salary, if population of city where accommodation is provided exceeds 10 lakhs but does not exceed 25 lakhs as per 2001 census ·   7.5% of salary, if accommodation is provided in any other city B. If House Property is taken on lease or rent by the employer, the perquisite value shall be : Lower of following : ·   Lease rent paid or payable by the employer or ·   15% of the salary *Salary includes: Basic Pay + DA+ Bonus + Commission + Taxable allowances
2 (i)	Rent Free Furnished Accommodation	Add 10% to taxable value of unfurnished accommodation of original cost of furniture and fixtures or actual charges paid
2 (i)	Furnished accommodation in Hotel	The accommodation should be due to work transfer and should be less than 15 days in any financial year. Lower of following ·         Actual cost paid or payable by employer ·         24 % of salary
2 (iii)	Services of a domestic servant including sweeper, gardener, watchmen or personal attendant for specified employees	Salary paid to these domestic helpers less any amount charged on employee, would be taxable perquisites
2 (iii)	Supply of gas, electricity or water for house for specified employees	Value of manufacturing cost per unit incurred by employer or amount paid to outside agency, incase purchased by employers.
2 (iii)	Motor Car / Other conveyance	·    The basic decision of taxable perquisites for motor car depends upon whether the vehicle is owned by employee or employer, who pays the maintenance costs and what is the engine capacity.  It further depends if you are using the vehicle completely for official purposes or for personal uses. ·    In any case, if the vehicle is used only for official purposes, the perquisite is completely tax exempt on maintenance of certain documents. For detailed info, please contact your CA
2 (iii)	Education Facilities	In school owned by employer or any other school, cost of school fess less Rs.1000 per child  is taxable For any reimbursement received towards fees, training is completely taxable.
2 (vi)	ESOP/ Sweat Equity Shares	Fair Market value of the shares less the amount paid by employee to acquire them Fair market price is average of opening and closing on date of exercise of option.
2 (viii)	Interest free Loan or concessional rate	· Find out the outstanding monthly balance · Find out rate of interest charged by the SBI in respect of loan for the same purpose advanced by it; · Calculate interest for each month of the previous year on the outstanding amount at the above rate of interest.
2 (viii)	Food and beverages provided by employer	Meals beyond Rs 50 per meal are fully taxable It does not include : a)   Food and non-alcoholic beverages provided during working hours in remote area or in an offshore installation; b)   Tea, Coffee or Non-Alcoholic beverages and Snacks during working hours c)   Food in office premises or through non-transferable paid vouchers usable only at eating joints provided by an employer if cost to the employer is Rs. 50(or less) per meal.

The remaining perquisites would be covered in the coming week of the write up.