Perquisites

Casual emolument or benefit attached to

an office or position in addition to salary or
wages
Something that benefits a man by going
into his own pocket
Need not be only in kind. It can be in cash.

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 Conditions To become perquisites

 Allowed by Employer to Employee

 Allowed during Continuance Of employment

 Directly Depend upon service

 Personal advantage To the employee

 Derived by Virtue of Employer’s authority

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Other conditions
Employer and employee relationship
should exist at any point of time- need not
be an employee now.
Legal origin is important- Un
authorized advantage taken by
employee without employer’s authority
will not become perquisites.

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 Perquisites Includes

• Rent free Accommodation Provided By employer (Accommodation

Related perquisites (1-3) including sweeper, gardener,
watchman, gas, electricity, etc)

2. Concessional Accommodation Provided By employer

3. Value of Benefits provided like furniture in the accommodation

4. Personal Obligations of Employee Met by employer

5. Funds paid by employer other than RPF/Insurance fund

6. Fringe Benefits Allowed To employees of organisation other Than

companies

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 Perquisites Taxable in the hands of employee
In the hands of employee
Category-A Category –B
• Rent free or concessional rent 1. Car given by employer
accommodation 2. Transport facility given by transport
• Sweeper in the house, gardener, undertakings except Railway and
watchman, personal attendant airlines.
3. Free/concessional gas, electricity, ( only to Specified Employee)
water etc
• Educational facility to employee’s
family members including servants
and dependent, parents, spouse
and children(need not be
dependent)
• Leave travel concession beyond 2
travels in a block period 1 to 5 taxable only to Specified
Employee
Short form (RSGEL)
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Special items in
computation of
perquisites

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 Rent Free accommodation(RFA)
Company’s House given at free of cost or rented by
company given to employee at free/concessional
rent.
Includes: house, flat, farm house, carvan, mobile
home, ship, floating structure-like boat.

Step1. Unfurnished Accommodation

Central or
State Government Private employees
employees

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1.Central or state government employee-RFA

License fee of flat determined by central

government is perquisites in the hands of
employee.

Fair market value of rent is not

important

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RFA-Government employee

Exercise:- Mr. X is working in Central government

service given rent free accommodation in an
government apartment at free of cost. The
license fee prescribed by government is Rs.3000
but fair rental value of the house is Rs. 10,000. How
much is taxable?

Answer:- Fair rent is not considered. The license fee

Rs. 3,000 is taxable in the hands of Specified
employee.

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2. Private Employees(RFA)
Value of perquisites depends on Population of
the city where accommodation provided.

Population as per 2001 census

Population Up to
Exceeding population Population beyond
10 lakhs
25 lakhs 10 lakhs-Up to25 lakhs

Owned Rented
Owned Owned
By By By
employer 15% salary
employer employer
Rented or amount Rented
By paid By By
company company To company
10% of outsider 7.5% of
15% of salary salary 11
Which ever Salary
Explanation to the diagram
If house property is owned by employer
depends on the population of the city
percentage differs. Big city it is 15% of salary,
medium city it is 10% and small city it is 7.5% of
salary for accommodation with out any facility
like furniture.

If house is rented by employer given to

employee it is 15% of salary or rent paid by
employer whichever is less taxable for specified
employees irrespective of the type of city.

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If Furniture provided by employer

If owned If rented

Actual hire
10% of original charges
Cost of furniture payable

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Meaning of salary for RFA
All Cash salary received or receivable in
hand (including taxable allowances) by the
employee himself.
Excludes all *perquisites and *DA which will
not come under retirement purpose

If any allowance is exempted (like HRA(partly),

children educational allowance up to Rs.100 Per
month or transport allowance up to Rs. 800 per
month etc.), to the extent exempted is not
included in the meaning of salary but balance is
included in the meaning of salary.

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Car (when non-taxable perquisite)
Re-imbursement of expenses in respect of car (which is
owned by employee and used for personal and official
purpose) (amount not taxable is up to Rs. 1,200 per month
for car having engine capacity of not more than 1600cc, Rs.
1,600 per month for car of above 1600cc and Rs. 600 per
month for driver).
Conveyance facility provided to High Court Judges and
Supreme Court Judges.
Conveyance facility provided to an employee to cover the
journey between office and residence.
 Others…. (non-taxable)
Interest-Free Loan
Interest-free / concessional loan of an amount not
exceeding Rs.20,000

Gift-in-kind up to Rs.5,000 in a year.

Employer's contribution to staff group insurance

scheme.
Exercise-RFA
 Value of rent free accommodation : Preetham is sales manager of a
private company and for previous year 2007-08,he received the
following emoluments(amts in Rs)
 Basic Salary 248000
 Bonus 16000
 Dearness allowance(50% forming part of salary) 60000
 Project allowance 15000
 Commission on sales 16000
 City compensatory allowance 25000
 Medical allowance 12000
 Employer contribution to recognized provision fund
20000
 Salary pertaining the year 2008-09 has been received in advance
20000

 (1) He has been provided with a rent free accommodation in Bangalore
owned by the employer. The population of Bangalore may be
to be 50 lakhs as per 2001 census
assumed
Q. Determine the taxable value of the perquisite in respect of rent free
accommodation.

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 (2) He has been provided with a rent free accommodation in jaipur
owned by the employer. The population of jaipur may be assumed to
be 15lakhs as per 2001 census
 Determine : a) Meaning of salary for RFA
 b)the taxable value of the perquisite in respect of rent free
accommodation.
 1. Meaning of salary:-
 All Cash salary received or receivable in hand including
taxable allowances by the employee himself.
 Excludes all *perquisites and *DA which will not come under
retirement purpose
Any allowance is not taxed( like
HRA(partly), children educational allowance
up to Rs.100 Per month or transport
allowance up to Rs. 800 per month etc.) are
not included in the meaning of salary.
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 Meaning of salary- Exercise
• The valuation of rent free accommodation shall be
15% of the salary i.e. 15% of (248000+
16000+30000+15000+16000+25000+12000)=Rs 54,300

• Note: Salary shall be taken on basis for the period for

which accommodation has been provided. Hence
advance salary for 2008-09 shall not be taken in
account.

• Employer’s contribution does not come to the

assessee in cash as it is paid directly to the
department. That is why I have mentioned the
meaning of salary is cash salary received by the
assessee himself.

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Exercise
 Value of free rent accommodation : sri Mohan is purchase manager of a
private company and for previous year 2007-08 he received the following
emoluments-

 Basic Salary 120000
 Bonus 16000
 Dearness allowance(50% forming part of salary) 60000
 Project allowance 15000
 Commission on purchase 16000
 City compensatory allowance 25000
 Medical allowance 12000
 Employer contribution to recognized provision fund 20000
 Salary pertaining the year 2008-09 has been received in advance 20000

 He is also in part employment with B ltd and is receiving salary of Rs
80000 P.A. he has been provided with a rent free accommodation in
Mysore owned by the employer. The population of Mysore may be
assumed to be 15 lakhs as per 2001 census. Determine taxable salary
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 solution
 Computation of taxable salary of Sri Mohan for assessment Year 2008-09

 Basic Salary 120000
 Bonus 16000
 Dearness allowance(50% forming part of salary) 60000
 Project allowance 15000
 Commission on purchase 16000
 City compensatory allowance 25000
 Medical allowance 12000
 Employer contribution to RPF in excess of 12% of salary 2000
 [20000- 12% of (120000+ 50% of 60000)]
 Salary from B ltd 80000
 Advance of salary 20000
 Value of housing facility[10% of (120000+16000+30000+ 31400
 15000+16000+25000+12000+80000)]

 Taxable Salary 397400

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Exercise
 Value of concessional accommodation: Sri Basant is purchase manager of a
private company and for the previous 2007-08 he received the following
emoluments-
 Basic Salary 240000
 Bonus 32000
 Dearness allowance(50% forming part of salary) 120000
 Project allowance 30000
 Commission on purchase 32000
 City compensatory allowance 50000
 Medical allowance 24000
 Employer contribution to recognized provision fund 40000
 2 months salary for year 2008-09 has been received in advance 20000

 What would be the value of accommodation if the employer charges rent of
Rs 2000 p.m. in the following independent cases:
 (a) The accommodation is provided in Hyderabad where popln as per
2001 census exceeds 25 lakh
 (b)The accommodation is provided in Alwar where popln as per 2001
census exceeds 18 lakh
 (c) The accommodation is provided at Tumkore (popln less than 10
lakhs) 22
Solution
 Soln: The valuation of accommodation provided at concessional
rent shall be as under-

 Place of accommodation Value of perquisite
 Hyderabad 15% of salary less rent recovered =
Rs 70200-24000=Rs46200
 Alwar 10% of salary less rent recovered =
Rs 46800-24000=Rs22800
 Tumkore 7.5% of salary less rent recovered
=Rs 35100-24000=Rs11100

 Salary = 240000+32000+60000+32000+30000+50000+24000 = Rs
468000


Any rent collected by employer

from employee, such amount is
from taxable perquisite.
deductible 23
Furnished accommodation in hotel
24% of salary paid or payable only for the period
accommodation provided
Or
Actual charges paid or payable by the employer to
such hotel
Whichever is lower
Exceptions:-1.The above rule is not applicable if such
employee stays less than 15 days in the previous year
and
2.Accommodation given only he is transferred to such
new place
Both the conditions should be fulfilled
Note:-Any amount collected from employee is
deductible from such calculations
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Perquisites –Domestic servants,
free supply of gas, electricity etc
Sweeper, gardener watchman personal assistant paid
by employer is perquisites to the extent of cost to the
employer.

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Monthly Fixed Education
allowance
Training of employees is not perquisites
Fixed educational allowance
Rs.100 per child per month is exempted per child.
Maximum two children. Beyond is taxable
 Hostel Rs.300 per month per child
exempted. Maximum two children. Beyond it is
taxable to the employee

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Payment of school fees and re-
imbursement of school fees

Taxable as perquisites fully

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Education facility to children(own) in their own
school or any other school/college
If less than Rs. 1000 per month exempted
If exceeds Rs. 1000 per month
cost of education in similar institution in the
near locality (minus )Rs. 1000(minus) amount
recovered.
Example:- Employer pays Rs. 1500 per month to the
school selected by employee for three children
and one grand children. How much is taxable
perquisites?

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Education facility to relative’s
children
Cost to the employer in such similar institution minus
amount recovered
 Important Note: Only for own children exemption
of Rs. 1000 allowed. But for the relative’s children
such deduction is not allowed.

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