Perquisite is a benefit or amenity granted or provided free of cost or at a concessional rate to an employee by the employer. Perquisites are taxable under the head “Salaries” in the Income Tax Act, 1961.

Section 17(2) of the Income Tax Act lists the following perquisites which are taxable:

• Rent-free accommodation provided by the employer.
• Value of any concession in the matter of rent for accommodation provided by the employer.
• Motor car allowance.
• Medical allowance.
• Education allowance.
• Leave travel allowance.
• Contribution to provident fund or superannuation fund by the employer.
• Any other benefit or amenity granted or provided free of cost or at concessional rate.

The value of perquisites is determined in accordance with the provisions of the Income Tax Act and the Income Tax Rules. The valuation of perquisites can be a complex process, and it is advisable to consult a tax expert to determine the taxable value of perquisites.

Here are some examples of perquisites that are taxable under Section 17(2) of the Income Tax Act:

• An employer provides a company car to an employee for his personal use. The value of the car allowance is taxable under Income Tax Act.
• An employer pays for the medical expenses of an employee’s dependents. The value of the medical allowance is taxable under Income Tax Act.
• An employer provides free education to the children of an employee. The value of the education allowance is taxable under Income Tax Act.
• An employer pays for the air travel expenses of an employee for his vacation. The value of the leave travel allowance is taxable under Income Tax Act.
• An employer contributes to a provident fund or superannuation fund on behalf of an employee. The value of the contribution is taxable to the employee under Income Tax Act.

It is important to note that not all perquisites are taxable. Some perquisites are exempt from tax, such as:

• The value of free food provided to employees in the employer’s canteen.
• The value of free medical facilities provided to employees in the employer’s hospital.
• The value of free transport provided to employees to and from work.

CASE LAWS

• CIT v. Hindustan Steel Ltd. (1982): In this case, the Supreme Court held that the value of rent-free accommodation provided to an employee by his employer is taxable as a perquisite, even if the accommodation is located in a remote area and is not of a luxurious nature under the Income Tax Act.
• CIT v. Steel Authority of India Ltd. (2003): In this case, the Supreme Court held that the value of any concession in the matter of rent for accommodation provided by the employer to an employee is also taxable as a perquisite under the Income Tax Act.
• CIT v. Indian Oil Corporation Ltd. (2006): In this case, the Supreme Court held that the value of any benefit or amenity granted or provided free of cost or at concessional rate to an employee is taxable as a perquisite, if such benefit or amenity is not specifically exempted under the Income Tax Act.
• CIT v. Larsen & Toubro Ltd. (2010): In this case, the Supreme Court held that the value of the motor car provided to an employee by his employer is taxable as a perquisite, even if the car is used by the employee for official purposes as well as for personal purposes under the Income Tax Act.
• CIT v. Infosys Ltd. (2015): In this case, the Supreme Court held that the value of the medical reimbursement provided to an employee by his employer is taxable as a perquisite, if the reimbursement exceeds the actual expenses incurred by the employee under the Income Tax Act.

FAQ QUESTIONS

• Q: What are perquisites under the Income Tax Act?

A: Perquisites are any benefits or amenities provided to an employee by the employer, over and above the salary. They are taxable under the Income Tax Act, 1961.

• Q: What are the different types of perquisites under the Income Tax Act?

A: The different types of perquisites include: * Rent-free accommodation * Car allowance * Medical allowance * Leave travel allowance * Education allowance * Club membership * Telephone allowance * Gratuity * other benefits or amenities

• Q: How are perquisites valued for tax purposes under the Income Tax Act?

A: The value of perquisites is determined by the Income Tax Act, 1961. The valuation method depends on the type of perquisite. For example, the value of rent-free accommodation is determined by the government’s prescribed rent, while the value of car allowance is determined by the actual cost of running and maintaining the car.

• Q: Are all perquisites taxable under the Income Tax Act?

A: No, not all perquisites are taxable. Some perquisites are exempt from tax, such as the following: * Children’s education allowance up to Rs. 100 per month per child. * Hostel expenditure allowance up to Rs. 300 per month per child. * Leave travel allowance for self and family. * Medical allowance.

• Q: How is the tax on perquisites calculated under the Income Tax Act?

A: The tax on perquisites is calculated in the same way as the tax on salary. The perquisites are added to the salary and the total income is taxed at the applicable slab rates.

• Q: What are the consequences of not reporting perquisites to the tax authorities under the Income Tax Act?

A: If you do not report perquisites to the tax authorities, you may be liable for a penalty. The penalty can be up to 30% of the amount of tax that you should have paid.

• Q: How can I find out more about perquisites and their taxation under the Income Tax Act?

A: You can find more information about perquisites and their taxation in the Income Tax Act, 1961. You can also consult with a tax advisor.