PERQUISITES

•The term “perquisite” is defined under section 17(2). The definition of perquisite is an inclusive one.

•The term ‘perquisite’ indicates some extra benefit in addition to the amount that may be legally due
by way of contract for services rendered. In modern times, the salary package of an employee normally
includes monetary salary and perquisite like housing, car etc.

•Perquisite may be provided in cash or in kind.

•Reimbursement of expenses incurred in the official discharge of duties is not a perquisite.

•Perquisite may arise in the course of employment or in the course of profession. If it arises from a
relationship of employer-employee, then the value of the perquisite is taxable as salary. However, if it
arises during the course of profession, the value of such perquisite is chargeable as profits and gains of
business or profession.

•Perquisite will become taxable only if it has a legal origin. An unauthorised advantage taken by an
employee without his employer’s sanction cannot be considered as a perquisite under the Act.
Example
• Suppose Mr. A, an employee, is given a house by his employer. On
31.3.2021, he is terminated from service.
But he continues to occupy the house without the permission of the
employer for six more months after which he is evicted by the employer.
The question arises whether the value of the benefit enjoyed by him
during the six months period can be considered as a perquisite and be
charged to salary.

It cannot be done since the relationship of employer-employee ceased to

exist after 31.3.2021. However, the definition of income is wide enough to
bring the value of the benefit enjoyed by Mr. A to tax as “income from other
sources”.
Perquisites taxable in the case of all employees
Perquisites taxable in the case of all employees
 Perquisites exempt in all cases
Telephone Facility Exempt
Transport Facility Transport facility provided by an employer engaged in the business of
carrying passengers or goods to his employees either free of charge or at
a concessional rate
Privilege passes and privilege ticket Privilege passes and privilege ticket orders granted by Indian Railways or
Airlines to its employees
Perquisites allowed outside India by the Perquisites allowed outside India by the Government to a citizen of India
Government for rendering services outside India;
Employer’s contribution to staff group Employer’s contribution to staff group insurance scheme
insurance scheme;
Annual premium by employer on a personal Payment of annual premium by employer on personal accident policy
accident policy effected by him on the life of the employee
Refreshment Food and non-alcoholic beverages provided in working hours in a remote
area or in an off shore installation are exempt from tax.

Tea coffee and non-alcoholic beverages and snacks in working hours are
tax-free perquisites.

Meals (lunch or dinner) in office hours if cost to the employer is Rs.50 per
meal.
Subsidized lunch Subsidized lunch or dinner provided to an employee

Recreational facilities Recreational facilities, including club facilities, extended to

employees in general i.e., not restricted to a few select employees

Amount spent on training of employees Amount spent by the employer on the training of employees or the
amount paid for the refresher management course including
expenses on boarding and lodging

Employer’s contribution towards Not chargeable to tax up to Rs.7.5L

Recognised PF, NPS, and superannuation
fund in excess of Rs.7.5L PA

Educational Facilities for family members Taxable

Leave Travel Allowance Concession (LTA) Leave travel concession, subject to the conditions specified under
section 10 (discussed separately)
Interest free/concessional Loan If aggregate amount of loan does not exceed Rs.20000, the
perquisite is not taxable.
Loan for medical treatement (given in rule 4A) is not taxable subject
to a few conditions.

(Interest @ SBI rate taxed for all other purposes)

Gift/ Gift Voucher A gift in kind up to Rs.5000 is exempt.

Gift in cash is taxable

Credit Card Exempt if used for official purposes.

Club Facilities 1.Exempt if used for official purposes (official party)

2. If health club, sports facilities etc. provided uniformly to all classes

of employees by the employer

3. Initial one time deposit of fees for corporate membership, where

benefit is allowed to all employees

Rent Free/ concessional accommodation Discussed separately

Movable assets Providing laptops and computers in any case
Medical Facilities Medical facilities subject to certain prescribed limits;

Amount paid for assurance on the
life of employee
Its taxable except in the following cases
1. Recognised PF
2. Superannuation fund
3. Group Insurance Schemes
4. ESI
5. Fidelity guarantee scheme

Sale of Movable assets at nominal Discussed separately

cost
Car Discussed separately

Sweat Equity Shares Discussed separately

Any other benefit Taxable