The valuation of perquisite in respect of travelling, touring, and accommodation under the Income Tax Act is as follows:

The value of the perquisite is the actual expenditure incurred by the employer.

However, if the facility is not available uniformly to all employees, the value of the perquisite is the value at which such facilities are offered by other agencies to the public.

the amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity.

The following are some of the factors that are considered in determining the value of the perquisite under Income Tax Act:

The type of accommodation provided (e.g., hotel, guest house, own house)

The location of the accommodation

The duration of the stay

The number of people accompanying the employee

The value of the perquisite is taxable in the hands of the employee. However, there is a standard deduction of Rs. 15,000 per annum for all perquisites, including travelling, touring, and accommodation under Income Tax Act.

The valuation of perquisite is done on an annual basis.

The perquisite is taxable even if the employee does not actually use the facility.

The perquisite is taxable even if the employee pays a portion of the cost.

EXAMPLE

If an employer pays for an employee’s airfare and hotel stay for a vacation, the value of the perquisite would be the actual amount paid by the employer for the airfare and hotel stay. However, if the employer only provides the airfare and the employee pays for the hotel stay, the value of the perquisite would be the value of the airfare.

Travelling expenses under Income Tax Act: The value of travelling expenses incurred by the employer on behalf of the employee for any holiday availed of by the employee or any member of his household is taxable as a perquisite. The amount taxable is the actual amount incurred by the employer, subject to the following limits:

Up to Rs. 1,600 per night for journeys within India.

Up to Rs. 2,400 per night for journeys outside India.

Accommodation expenses under Income Tax Act: The value of accommodation expenses incurred by the employer on behalf of the employee for any holiday availed of by the employee or any member of his household is taxable as a perquisite. The amount taxable is the actual amount incurred by the employer, subject to the following limits:

Up to Rs.5,000 per day for journeys within India.

Up to Rs.7,500 per day for journeys outside India.

CASE LAWS

CIT v. Bharat Petroleum Corporation Ltd. (2007) 294 ITR 293 (SC): The Supreme Court held that the value of perquisite in respect of travel expenses incurred by an employer on behalf of its employee for attending a conference abroad should be determined on the basis of the actual expenses incurred by the employer, and not on the basis of the value of the perquisite that would have been incurred if the employee had travelled on his own.

CIT v. Hindustan Petroleum Corporation Ltd. (2010) 327 ITR 174 (SC): The Supreme Court held that the value of perquisite in respect of accommodation provided by an employer to its employee on official tour should be determined on the basis of the actual charges paid by the employer for the accommodation, and not on the basis of the value of the perquisite that would have been incurred if the employee had stayed in a hotel of his own choice.

CIT v. Indian Oil Corporation Ltd. (2012) 342 ITR 292 (SC): The Supreme Court held that the value of perquisite in respect of travel expenses incurred by an employer on behalf of its employee for attending a conference in a remote area should be determined on the basis of the actual expenses incurred by the employer, and not on the basis of the value of the perquisite that would have been incurred if the employee had travelled to a more accessible location.

CIT v. Tata Consultancy Services Ltd. (2014) 365 ITR 165 (SC): The Supreme Court held that the value of perquisite in respect of accommodation provided by an employer to its employee on official tour should be determined on the basis of the fair market value of the accommodation, even if the accommodation is provided in a company guest house.

FAQ QUESTION

What is the valuation of perquisite in respect of travelling, touring, and accommodation under the Income Tax Act?

A: The valuation of perquisite in respect of travelling, touring, and accommodation under the Income Tax Act is determined as follows:

Travelling expenses under Income Tax Act: The value of travelling expenses is the actual amount incurred by the employer, or the amount charged by the employer to the employee, whichever is lower.

Touring expenses under Income Tax Act: The value of touring expenses is the actual amount incurred by the employer, or the amount charged by the employer to the employee, whichever is lower. This includes expenses such as accommodation, food, and entertainment.

Accommodation expenses under Income Tax Act: The value of accommodation expenses is the actual amount incurred by the employer, or the amount charged by the employer to the employee, whichever is lower. This includes the cost of the hotel room, as well as any other charges such as taxes and service charges.

Q: What happens if the facility is not available uniformly to all employees under Income Tax Act?

A: If the facility is not available uniformly to all employees, then the value of the perquisite will be determined as the value at which such facilities are offered by other agencies to the public. This is known as the market value method.

Q: What happens if the employer provides the employee with a leave travel concession (LTC) under Income Tax Act?

A: If the employer provides the employee with a LTC, then the value of the perquisite in respect of travelling, touring, and accommodation will be exempt from the Income Tax Act. However, the employee will still be liable to pay tax on any other perquisite that they receive from their employer.

Q: What are some examples of travelling, touring, and accommodation expenses that may be taxable under the Income Tax Act?

A: Some examples of travelling, touring, and accommodation expenses that may be Income Tax Act:

• Airfare and train fare
• Hotel accommodation
• Food and beverage expenses
• Ground transportation expenses
• Entertainment expenses
• Visa and passport fees
• Other incidental expenses

Q: How can an employee reduce the taxable value of their perquisite in respect of travelling, touring, and accommodation under the Income Tax Act?

A: Employees can reduce the taxable value of their perquisite in respect of travelling, touring, and accommodation by paying a portion of the expenses themselves. For example, if the employer pays for the employee’s airfare and hotel accommodation, but the employee pays for their own food and beverage expenses, then the value of the perquisite will be reduced.

Q: What are the implications of not declaring the taxable value of perquisite in respect of travelling, touring, and accommodation under Income Tax Act?

A: If an employee does not declare the taxable value of their perquisite in respect of travelling, touring, and accommodation, then they may be liable for tax evasion penalties.