The valuation of perquisite in respect of gift, voucher, or token under the Income Tax Act is as follows:

• Gift under Income Tax Act: The value of a gift from the employer to the employee is the fair market value of the gift. This means that the value of the gift is determined by what someone would be willing to pay for it in an open market.
• Voucher under Income Tax Act: The value of a voucher from the employer to the employee is the face value of the voucher. This means that the value of the voucher is determined by what the employee can purchase with it.
• Token under Income Tax Act: The value of a token from the employer to the employee is the fair market value of the token. This means that the value of the token is determined by what someone would be willing to pay for it in an open market.

However, there is a threshold for the value of a gift, voucher, or token below which it is not taxable. The threshold is Rs. 5,000 in the aggregate during the previous year. This means that if the value of all gifts, vouchers, and tokens received by an employee from their employer in a previous year is below Rs. 5,000, then the value of the perquisite is not taxable.

If the value of a gift, voucher, or token exceeds Rs. 5,000 in the aggregate during the previous year, then the value of the perquisite is taxable . The taxable value of the perquisite is the fair market value of the gift, voucher, or token, or the face value of the voucher, whichever is lower.

Here are some examples of gifts, vouchers, and tokens that may be taxable under Income Tax Act:

• A gift of cash or money
• A gift of goods or services
• A voucher for goods or services
• A token for goods or services

EXAMPLE

Example of Valuation of Perquisite in Respect of Gift, Voucher, or Token under Income Tax Act with Specific States of India

Employee: A software engineer working in Bangalore, Karnataka.

Employer: A multinational company headquartered in Mumbai, Maharashtra.

Gift: The employer gives the employee a gift voucher worth Rs. 10,000 from a popular department store in Bangalore.

Valuation of perquisite:

• Under the Income Tax Act: The value of the gift voucher is Rs. 10,000.
• In Bangalore: The value of the gift voucher is Rs. 10,000, as there is no special provision for the valuation of gift vouchers in Bangalore.

Conclusion:

The employee will be liable to pay tax on Rs. 10,000, the value of the gift voucher, in their income tax return.

Example with specific states of India:

Employee: A doctor working in Mumbai, Maharashtra.

Employer: A private hospital headquartered in Delhi, Delhi.

Gift: The employer gives the employee a gift voucher worth Rs. 10,000 from a popular department store in Mumbai.

Valuation of perquisite:

• Under the Income Tax Act: The value of the gift voucher is Rs. 10,000.
• In Mumbai: The value of the gift voucher is Rs. 10,000, as there is no special provision for the valuation of gift vouchers in Mumbai.

CASE LAWS

: How is the value of a gift, voucher, or token valued for tax purposes under Income Tax Act?

A: The value of a gift, voucher, or token is valued for tax purposes as follows under Income Tax Act:

• Gift: The value of a gift is the amount of the gift itself.
• Voucher: The value of a voucher is the face value of the voucher.
• Token: The value of a token is the value of the goods or services that can be redeemed with the token.

Q: Is there a minimum value for gifts, vouchers, or tokens that are taxable under Income Tax Act?

A: Yes, there is a minimum value for gifts, vouchers, or tokens that are taxable. The minimum value is Rs. 5,000 in the aggregate during the previous year. This means that if the employee receives gifts, vouchers, or tokens worth less than Rs. 5,000 in the aggregate during the previous year, then the value of the perquisite will be nil.

Q: What happens if the gift, voucher, or token is not redeemable for cash under Income Tax Act?

A: If the gift, voucher, or token is not redeemable for cash, then the value of the perquisite will be determined on the basis of the market value of the goods or services that can be redeemed with the gift, voucher, or token.

Q: What happens if the gift, voucher, or token is given to the employee’s family member under Income Tax Act?

A: If the gift, voucher, or token is given to the employee’s family member, then the value of the perquisite will be taxable in the hands of the employee.

Q: How can an employee reduce the taxable value of their perquisite in respect of gifts, vouchers, or tokens under Income Tax Act?

A: Employees can reduce the taxable value of their perquisite in respect of gifts, vouchers, or tokens by paying a portion of the cost themselves. For example, if the employer gives the employee a gift voucher worth Rs. 10,000, but the employeepays Rs. 2,000 towards the cost of the voucher, then the value of the perquisite will be reduced to Rs. 8,000.

Q: What are the implications of not declaring the taxable value of perquisite in respect of gifts, vouchers, or tokens under Income Tax Act?

A: If an employee does not declare the taxable value of their perquisite in respect of gifts, vouchers, or tokens, then they may be liable for tax evasion penalties