What is perquisite?

The income tax department on August 18 notified amendments to the income tax rules for valuing perquisites of rent-free or concessional accommodation by employers to employees. What are perquisites and how does this change in tax rule impact you?

What is perquisite?

Perquisites are benefits employers offer their employees in addition to their salaries. It is defined as any casual emolument or benefit attached to an office or position in addition to salary or wages.

Types of Perquisites

Perquisites are of two parts ─ monetary perquisites and non-monetary perquisites. While monetary perquisites are taxable for all employees, non-monetary perquisites are taxable for specified employees.

According to Section 17(2) of the Income Tax Act, perquisite includes:

• The value of rent-free/accommodation provided by an employer.
• The value of any concession in rent of any accommodation provided to a taxpayer by his employer.
• Any money paid by an employer for an obligation for which the taxpayer is liable to pay.
• The value of any benefit/amenity granted free or at a concessional rate to specified employees, etc.
• The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to a taxpayer.
• Any sum payable by the employer, whether directly or through a fund other than a recognised provident fund or an approved superannuation fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity.
• The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee to the extent it exceeds Rs 1 lakh.
• The value of any other fringe benefit or amenity as may be prescribed.

Taxation of perquisites

Based on their tax treatment, perquisites can be divided into three categories:

1. Perquisites taxable in all cases
2. Perquisites not taxable
3. Perquisites which are taxable only in the hands of specified employees