What is Perquisites And its Taxability


Ø  Meaning of Perquisite:

In simple words, perquisites are the benefits or facilities provided by an employer to his employee in addition to the normal salary.

Ø  List of Perquisites:

A.             CATEGORY 1 - PERQUISITES TAXABLE U/5 17(2):

Ø  Rent free accommodation- Section 17(2)(i) & Rule 3(1)

Ø  Accommodation at concessional rent- Section 17(2)(ii) & Rule 3(1)

Ø Perquisites taxable in case of .specified employees only- Section 17(2)(iii) & Rules 3(2) to 3(6)

Ø  Any obligation of the employee discharged/met, by the employer- Section 17(2)(iv)

Ø  Payment of life insurance premium by the employer on behalf of the employee - Section 17(2)(v)

Ø  Specified securities or sweat equity shares allotted/transferred by the employer to his employees free of cost or at concessional rates - Section 17(2)(vi)

Ø  Employer's contribution to approved superannuation fund- Section 17(2)(vii)

Ø  Any other fringe benefit- Section 17(2)(viii) & Rule 3(7)


Ø  Medical facility - Proviso to Section 17(2)

Ø  Leave Travel Concession (LTC)/Leave Travel Assistance (LTA) - Section 10(5) & Rule 2B

RENT FREE ACCOMMODATION - {Section 17(2)(i): Rule 3(1))

In Case of Government Employees

In case of rent-free accommodation provided by the Central Government or the State Government to its employees, perquisite value shall be the license fee determined as per the rules framed by the Government in this regard.

In Case of Non-Government Employees

Case 1- Accommodation is NOT OWNED by the Employer :

In case of accommodation taken on rent by the employer and given to the employee free of rent, the taxable value of perquisite shall be least of the following:

      15% of RFA salary

      Rent charges paid/payable by the employer

Case 2 – Accommodation is OWNED by the Employer :

    In case of accommodation owned by the employer and given to the employee free of rent, the taxable value of perquisite

shall be as follows:

Note: Meaning of RFA Salary:

RFA Salary Includes

RFA Salary Excludes

              Basic Pay;

              Dearness Allowance/Pay (only to the extent it forms part of salary for retirements benefits);

              Taxable portion of all Allowances;

Bonus/Commission/Fees, etc;

              Leave Salary received by the employee during his employment.

              Taxable portion of all Perquisites (whether monetary or non-monetary)

              Any payment at the time of retirement or after retirement.

Examples: Gratuity, commuted pension, provident fund, etc

              Arrears of salary;

              Advance salary.

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