Perquisites are non-monetary benefits provided to an employee by the employer. These can vary depending on an employee’s position in that particular company. Depending on their type, perquisites can be eligible for tax deductions or not. Section 17(2) of the Income Tax Act discusses perquisites in income tax. Read on to know the meaning, benefits, their classification and if you are eligible for tax deductions.
The tax calculated for the prerequisite is separated from an employee’s salary. Following are the benefits which come under Section 17(2):
Due to taxation purposes, perquisites are divided into the following categories:
Following are the tax-free perquisites as mentioned in the Income Tax Act-
Even if all the employees are eligible for taxes on the mentioned perquisites provided, some employees can avail of tax-free perquisites. They are mentioned below:
Usually, the taxability of perquisites is calculated as an average of income tax which is based on the following:
Owned by the employer:
|Less than Rs. 10 lakh
|More than Rs. 10 lakh but less than Rs. 25 lakh
|More than Rs. 25 lakh
Leased by the employer:
|Hotel or guest house for more than 15 days
|Actual rent or 15% of the value, whichever is less
The Government taxes perquisites at a rate of 30% of the total value of fringe benefits. A company, firm, association or body of individuals who provides these fringe benefits and perquisites to the employees have to pay perquisite taxes.
Here is an example for a better understanding of the calculation of the perquisite taxes.
Suppose the head salary of an employee is Rs. 8 lakh, which includes the amount of the perquisites provided by the company, which is Rs. 90,000.
Now, perquisite tax will be charged under salaries which is Rs. 8, 00,000
|Tax on salary inclusive of education and health cess at 4%
|Average tax rate
|(75,400/8,00,000) X 100= 9.4%
Tax paid on perquisite amount Rs. 90,000 will be-
9.24% X 90,000= Rs. 8316
Hence, monthly TDS amount will be 8316/12 = 693.
Also Read: How To Calculate Taxable Income?
Perquisites offer benefits to the taxpayer but bring tax implications. Hence, it might become complicated for an employer to provide those perquisites while keeping in mind the implications of each.
Ans: Allowances are monetary benefits given to the employee with the salary like a house allowance, travel allowance, etc., whereas perquisites are non-monetary benefits provided to the employee.
Ans: Perquisites are included in the salary income only if provided to an employee by an employer. But in cases where perquisites are received from an individual are taxable under ‘Income from other sources’.
Ans: Perquisite is an allowance included in your salary and is exempted from taxes to a certain extent according to the Income Tax Regulations.
Ans: Yes, pension incomes are taxed under salary income. However, pensions received from UNO (United Nations Organisation) are exempted.
Ans: Yes, leave encashment is taxable under salary during service. However, for the government employees, leave encashment received at the time of retirement is exempted from tax.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
|Section 80 G
|Section 80C, 24(b), 80EE & 80EEA
|Section 80 EEB
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