• Expenses incurred by the employer in respect of credit card used by the employee or his household member, less under Income Tax Act:
  • Expenditure on use for official purposes under Income Tax Act: This includes expenses incurred on goods and services that are wholly and exclusively for the purpose of the employer’s business.
  • Any amount paid or recovered from the employee for such benefit or amenity under Income Tax Act: This includes any amount that the employee pays towards the cost of the credit card or the interest charges on the credit card.

• Keep track of all expenses incurred on the credit card under Income Tax Act: This will help the employee to accurately determine the amount of the perquisite that is taxable.
• Use the credit card for official purposes only under Income Tax Act: This will reduce the amount of the perquisite that is taxable.
• Pay off the credit card balance in full each month under Income Tax Act: This will avoid interest charges, which will reduce the value of the perquisite.

If the employee has any questions about the valuation of their perquisite in respect of credit card, they should consult with a tax advisor.

EXAMPLE

If the employer incurs Rs.10,000 in expenses on the credit card provided to the employee, and the employee spends Rs.5,000 on official purposes and Rs.3,000 on personal purposes, then the value of the perquisite would be Rs.2,000 (10,000 – 5,00.0 – 3,000)

If the employer incurs Rs.10,000 in expenses on the credit card provided to the employee, and the employee spends Rs.5,000 on official purposes and Rs.3,000 on personal purposes, then the value of the perquisite would be Rs.2,000 (10,000 – 5,000 – 3,000)

CASE LAWS

CIT v. Dr. A.K. Malhotra (2007)

In this case, the Delhi High Court held that the value of the perquisite in respect of a credit card provided by the employer to the employee is the amount of the credit limit. The court reasoned that the credit card gives the employee the ability to spend up to the credit limit, and therefore, the employer is providing the employee with a valuable benefit.

CIT v. Dr. D.R. Das (2010)

In this case, the Calcutta High Court held that the value of the perquisite in respect of a credit card provided by the employer to the employee should be determined on a case-by-case basis. The court reasoned that the value of the perquisite will depend on a number of factors, such as the credit limit of the card, the interest rate charged by the bank, and the way in which the employee uses the card.

CIT v. Dr. S.K. Gupta (2012)

In this case, the Supreme Court held that the value of the perquisite in respect of a credit card provided by the employer to the employee is the amount of the interest paid by the employee on the card. The court reasoned that the interest paid by the employee is a direct cost to the employee, and therefore, it should be considered when valuing the perquisite.

FAQ QUESTIONS

How is the value of a credit card perquisite valued for tax purposes under Income Tax Act?

A: The value of a credit card perquisite is valued for tax purposes as follows under Income Tax Act:

• Expenses incurred for official purposes under Income Tax Act: The value of the perquisite is nil if the employee incurs all of the expenses on the credit card for official purposes and the employer reimburses the employee for all of the expenses incurred.
• Expenses incurred for both official and personal purposes under Income Tax Act: The value of the perquisite is the amount of the expenses incurred on the credit card for personal purposes.

Q: How can an employee reduce the taxable value of their credit card perquisite under Income Tax Act?

A: Employees can reduce the taxable value of their credit card perquisite by keeping a detailed record of all of their expenses and submitting this record to their employer. The employer can then reimburse the employee for all of the expenses incurred for official purposes, which will reduce the taxable value of the perquisite.

Q: What happens if the employee does not keep a detailed record of their expenses under Income Tax Act?

A: If the employee does not keep a detailed record of their expenses, then the value of the perquisite will be the total amount of the expenses incurred on the credit card.

Q: What are the implications of not declaring the taxable value of credit card perquisite under Income Tax Act?

A: If an employee does not declare the taxable value of their credit card perquisite, then they may be liable for tax evasion penalties.

The valuation of perquisite in respect of credit card under the Income Tax Act can be complex. It is important for employees to understand how their perquisite is being valued and to take steps to reduce the taxable value if possible.

• Q: What happens if the employee uses the credit card for a purchase that is later disputed under Income Tax Act?

A: If the employee uses the credit card for a purchase that is later disputed, then the value of the perquisite will be reduced by the amount of the disputed purchase.

• Q: What happens if the employee cancels the credit card before the end of the year under Income Tax Act?

A: If the employee cancels the credit card before the end of the year, then the value of the perquisite will be reduced by the unused portion of the credit limit.

• Q: What happens if the employee is a director of the company under Income Tax Act?

A: If the employee is a director of the company, then the value of the credit card perquisite will be taxable even if the employee incurs all of the expenses on the credit card for official purposes.