Valuation of Perquisites under Rule 3

A – RENT FREE ACCOMODATION

1. ACCOMODATION - UNFURNISHED

Category of Value of unfurnished accommodation

Employer
Accommodation License     fee  determined               by Central/State
provided by government
Central/State
Government Less: Rent Actually paid  by employee
Accommodation A) Where accommodation is owned by employer
provided   by  any Population as per 2001 Census Valuation
other employer a) More than 25 lakhs 15% of salary
b) More than 10 lakhs and less 25 lakhs 10% of salary
Note : Rent paid c) Less than 10 Lakhs 7.50% of salary
by employee B) Where accommodation is taken on lease or rent by the
shall be deducted employer
Actual amount of lease rental paid or payable by the employer or
15% of salary whichever is lower

2. VALUATION OF FURNISHING – The Value of furnishing is uniform for all the

category of employees as below

Nature of furnishing Valuation

Furniture owned by employer 10% of actual cost of furniture
Furniture taken on rent or lease by Actual hire charges paid by employer
employer

3. VALUATION – HOTEL ACCOMMODATION:

The Value of hotel accommodation is uniform for all category of employees. The value
is 24% of salary or actual charges paid by employer whichever is lesser.

4. Notes:
1) Salary = Basic + DA (forming part of retirement benefits)+taxable value of
allowance + all monetary payments by whatever name called, but shall not include
value of perquisite and employer’s contribution to RPF.
2) Any amount recovered or received from employer is deducted from the prescribed
valuation
3) Exempted Accommodations :
a) Accommodation provided in rural area provided to an employee working at
mining site or an onshore oil exploration site, or a project execution site or a
dam site or power generation site or an offshore site. Remote area means an
area located at least 40 kilometers away from a town having population of not
exceeding 20,000
 b) Accommodation of temporary nature having plinth area of 800 sft or less and
located at least 8 km away from the local limits of municipality or cantonment
board provided to an employee working at a mining site or an onshore oil
exploration site or a project site or a dam site or a power generation site or an
offshore site is not chargeable
c) Where on account of transfer of an employee, he is provided with
accommodation at the new place of posting while retaining the accommodation
at other place, the value of perquisite in respect of one accommodation at the
option of employee is not chargeable for a period of 90 days.
d) Hotel accommodation provided to an employee on account of transfer from one
place to another, is not chargeable if the aggregate period does not exceed 15
days

B. MOTOR CAR AND OTHER AUTOMOTIVE

WHOLLY PRIVATE PURPOSE PARTLY OFFICIAL & PARTLY PRIVATE

A. Car owned by the employee and expenses are reimbursed by the employer
Actual expenses of employer  1. calculate actual expenditure on by employer 
2. LESS : if car <= 1.6 Litres engine capacity,
less: amount recovered from the perquisite is Rs.1800 p.m. if greater than 1.6
employee Litres CC Rs.2400 p.m. with Rs.900 p.m. if
chauffeur provided, or higher sum as recorded
by logbook by employer 
3. Less :amount recovered from the employee (if
any)
B. Car is owned/ hired by the employer and expenses met by the employer
1. Actual Expenses by 1. if car < =1.6 Litres engine capacity,
employer including perquisite is Rs.1800 p.m.,
chauffeur Salary 2. if greater than 1.6 Litres CCRs.2400 p.m.
2. Plus  depreciation (10% of the 3. in any case Rs.900 p.m. if chauffeur
original cost of car)/ hire provided
charges(if car is hired)  Note : nothing is deductible in respect of any
3. Less :amount recovered amount recovered from employee.
C. Car is owned/ hired by the employer and expenses met by the employee
1. Depreciation(10 % of the 1. If car is < =1.6 Litres CC, perquisite is Rs.600
original cost of the car)/ p.m.,
hire charges + chauffeur 2. if greater than 1.6 Litres CCRs.900 p.m.
salary. 3. in any case Rs.900 if chauffeur provided
2. less : amount recovered Note :nothing is deductible in respect of any amount
from the employee recovered from employee.
D. Any other Automotive owned by employee and expense met by employer
Not applicable 1. actual expenditure on by employer 
2. LESS : Rs. 900 per month.

1. Conditions to be satisfied for a claim that Car is used for official purpose
OR the actual amount of expense on motor car owned by employee is more
than prescribed deduction:
 a) The employer has maintained complete details of journey undertaken for offcial
purpose which may include date of journey, destination, mileage, and the
amount of exepnditure incurred thereon.
b) The employer gives a certificate to the effect that the expenditure was incurred
wholly and exclusively for the performance of official duties
c) Content of log book - complete details of the journey such as date of journey
destination, mileage and amount of the expenditure incurred.
d) The priciple of Arms length price will apply while cars taken from related
parties.
2. Where more than one car is being provided for use for employee or
member of his family then valuation on one car will be as partly used for
official purpose and partly for private purpose and other car will be valued as
fully used for private purpose.
3. Car facility between office to residence and back is not chargeable to tax at all.

OTHER PERQUISITES

PERQUISITE VALUATION
Sweeper,                   gardener, Actual cost to the employer
watchman,                   personal Less: Amount recovered if any
attendant
Supply   of    gas, electric energy,
Water
a) From own source Manufacturing cost
b) From outside source Actual expenditure incurred   or reimbursement
Less: Amount, if any recovered
a) If in an institution owned by employer or or
facility is provided owing to his employment –
Free     or concessional Perquisite shall be cost of similar education
Educational  facilities for However if children studying then the value in excess
any           member  of of Rs. 1,000 per month per child is only taxable
employees household b) Other institutions- Actual expenditure or
reimbursement
Less: Amount, if any recovered
Interest free Concessional Interest amount, as per SBI rates as on 1 st day of
loan                 previous year on maximum outstanding monthly
balance
Less: Interest recovered employee,
(Petty loan upto Rs. 20,000 or loan for medical
treatment in respect of diseases specified under
Rule3A not taxable provided not reimbursed under
any Medical Insurance Scheme)
Amount of expenditure incurred by the employer
Less: Amount recovered from the employee
Free  food  and         non (if employer provides free food and Non alcoholic
alcoholic beverages beverages during the office working hour at office
premises or through paid voucher and amount of
expenditure not exceeding Rs. 50 per meal.)
Gifts/Vouchers or token to Value of such gift
employees However, such value to be considered Nil, if the value
of gift per employee during the previous year in
aggregate is below Rs. 5,000.
Memberships and annual fees
Use of movable assets (other
than Laptops)
Transfer      of              movable
asset         to the        employee
direct or indirectly
Any             other benefits      or
amenities, services, rights or
privilege
Equity stock           options
scheme (ESOP)
SEE NOTE BELOW
Actual amount of expenditure or reimbursement
Less: Amount, if any recovered from the employee
for such benefit or amenity.
Note: However, there will be no perquisite in the
hands of employees if complete detail in respect of
such expenditure are maintained by the employer &
the employer gives the certificate to the effect that the
expenditure was incurred wholly and exclusively for
the performance of official duties.
10% of actual cost of the asset or the amount of rent
paid or payable
Less: Amount, if any recovered
Actual cost of movable asset
Less: 10% of depreciation for each completed year
which such assets was put to use by the employer
(In case of computer and electronic items 50 percent
and motor car 20 percent by reducing balance
method)
Less: Amount, if any recovered
Cost to employer (based on arm’s length transaction)
Less: Amount, if any recovered
Note: Expenses on telephone mobile phone actually
incurred on behalf of the employee by the employer
not to be taxed.
Fair Market Value of the specified securities or
sweat Equity Share on the date on which the option
is exercised by the employee
Less: Amount, if any recovered

Note : For determining the fair market value, Rule 3(8) prescribes method for
determining the fair market value of specified security or Sweat Equity Share on the
date on which the option is exercised by the employee is as follows:

a) In case where the company is listed on the recognized stock exchange, the fair
Market shall be average of the opening price and closing price of the share on
the date of exercising option on the stock exchange.
b) Where the share is listed on more than one recognized stock exchanges, FMV
shall be average of the opening price and closing price of the share on the date
of exercising option on the recognized stock exchange which records highest
volume of trading in the shares.
c) Where there is no trading in the share on any recognized exchange, Fair Market
Value shall be the value of the share in company as determined by a merchant
banker on the date of exercising option.

Medical Facilities
Expense incurred or reimbursed by the employer for the medical treatment of the
employee or his family (spouse and children, dependent – parents, brothers and
sisters) in any of the following hospital is not chargeable to tax in the hands of the
employee:
a) Hospital maintained by the employer.
b) Hospital maintained by the Government or Local Authority or any other
hospital approved by Central Government
c) Hospital approved by the Chief Commissioner having regard to the prescribed
guidelines for treatment of the prescribed diseases.
d) Medical insurance premium paid or reimbursed by the employer.
e) Expenditure on medical treatment outside India, including stay expenses for
patient and one attendant to the extent permitted by RBI. Travel expenses
exempted only if he Gross total income of the employee is less than
Rs.2,00,000/-