Tax Payers Information Series-36

VALUATION OF
PERQUISITES

INCOME TAX DEPARTMENT

Directorate of Income Tax (PR,P&P)
6th Floor, Mayur Bhawan,
Connaught Circus,
New Delhi-110001
 DISCLAIMER:

This booklet should not be construed as

an exhaustive statement of the Law. In
case of doubt, reference should always
be made to the relevant provisions of the
Direct tax Laws and Rules and where
necessary, notifications issued from time
to time
 PREFACE
Booklets under the ‘Tax Payers Information Series’
are published as a part of the endeavour of the Income Tax
Department to increase the awareness of the taxpayers
about the provisions of tax laws and the steps taken by
the government to reduce the complexities of tax laws and
to improve Tax Payer Service. The updated edition of the
Tax Payers Information Series booklet titled “Valuation
of Perquisites” will assist a large number of salaried tax
payers in computing their tax liability correctly.

It is felt that in many cases, neither the employers

nor their employees are aware about the includability of
the value of various perquisites in the total income of the
employees. In some cases, employers and employees are not
aware as to how to correctly value the perquisites. Efforts
have been made to address all such issues in this Booklet.
The author Sh. Parneet Singh Sachdev, Pr.DIT(Inv.),
Ludhiana has taken keen interest in updating the edition
and the book is vetted by Sh. Jagdeep Goel, CIT(A)-1,
Gurugram. We thank them both for their efforts.

We are hopeful that readers will find this publication

quite useful. The Directorate of Income tax (Public Relations,
Printing & Publicity) welcomes any suggestion to further
improve this publication.

 (Debjyoti Das)
New Delhi Addl.Director General
Date : 23.05.2018 (PR,P&P), CBDT

iii
 TABLE OF CONTENTS

Sr. Particular Page No.

No.

1. Perquisites 1

2. Taxation of Perquisites 3

3. Valuation of Perquisite 7

4. Value of certain other fringe 17

benefits

5. Definition of Specified Employee 27

6. Meaning of an Allowance 28

7. Example on salary 35

iv
 1. PERQUISITES

“Perquisite” may be defined as any casual

emolument or benefit attached to an office or
position in addition to salary or wages.

“Perquisite” is defined in the section 17(2) of the

Income tax Act as including:

(i) Value of rent-free/accommodation provided

by the employer.

(ii) Value of any concession in the matter of rent

respecting any accommodation provided to
the assessee by his employer.

(iii) Any sum paid by employer in respect of an

obligation which was actually payable by
the assessee.

(iv) Value of any benefit/amenity granted

free or at concessional rate to specified
employees etc.

1
(v) The value of any specified security or sweat
equity shares allotted or transferred, directly
or indirectly, by the employer, or former
employer, free of cost or at concessional
rate to the assesssee.

(vi) Any sum payable by the employer, whether

directly or through a fund other than a
recognized provident fund or an approved
superannuation fund to effect an assurance
on the life of the assessee or to effect a
contract for an annuity.

(vii) The amount of any contribution to an

approved superannuation fund by the
employer in respect of the assessee, to the
extent it exceeds one lakh rupees; and

(viii) The value of any other fringe benefit or

amenity as may be prescribed.

Basically the perquisites are divided in two parts

i.e. monetary perquisites and non monetary
perquisites. Monetary perquisites are taxable for
all employees and non monetary perquisites are
taxable in the hands of specified employees - ref.
sec.17(2)(iii)

2
2. TAXATION OF PERQUISITES

2.1 Perquisites may be defined as any casual

emolument or benefit attached to an office or
position in addition to salary or wages. It also
denotes something that benefits a person by going
into his own pocket. It does not, however, cover
mere reimbursement of necessary disbursements.
Perquisites can be divided in the following 3
categories:

1. Perquisites taxable in all cases

2. Perquisites not taxable

3. Perquisites which are taxable only in the

hands of specified Employees.

3
4
2.2 PERQUISITES TAXABLE IN THE HANDS
OF THE EMPLOYEE AS A PART OF
SALARY INCOME

i) Value of rent free accommodation

ii) Value of any benefit/amenity granted free

or at concessional rate to specified employee

iii) Any sum paid by employer in respect of an

obligation, which was actually payable by
the employee.

iv) Any sum payable by the employer, directly

or through a fund for assurance on life of
the employee or to effect contract for an
annuity.

v) Free motor car facility for personal use of

employee

vi) Perquisite arising out of supply of gas,

electric energy or water:

vii) Free/Concessional Educational Facility

5
viii) Free/Concessional journeys provided by
an undertaking engaged in carriage of
passengers or goods.

ix) Provision for sweeper, gardener, watchman

or personal attendant.

x) Value of certain other fringe benefits.

6
3. VALUATION OF PERQUISITES

As a general rule, the taxable value of perquisites

in the hands of the employees is its cost to the
employer. However, specific rules for valuation of
certain perquisites have been laid down in Rule
3 of the I.T. Rules. These are briefly given below:

3.1 VALUATION OF UNFURNISHED RESI-

DENTIAL ACCOMMODATION PROVIDED
BY THE EMPLOYER:-

(a) Union or State Government Employees-

The value of perquisite is the license fee as
determined by the Govt. as reduced by the
rent actually paid by the employee.

(b) Non-Govt. Employees- The value of

perquisite is an amount equal to 15% of
the salary in cities having population more
than 25 lakh, 10% of salary in cities where
population as per 2001 census is exceeding
10 lakh but not exceeding 25 lakh and 7.5%
of salary in areas where population as per

7
 2001 census is 10 lakh or below. In case
the accommodation provided is not owned
by the employer, but is taken on lease
or rent, then the value of the perquisite
would be the actual amount of lease rent
paid/payable by the employer or 15% of
salary, whichever is lower. In both of above
cases, the value of the perquisite would be
reduced by the rent, if any, actually paid by
the employee.

3.2 Value of Furnished Accommodation- The

value would be the value of unfurnished
accommodation as computed above,
increased by 10% per annum of the cost of
furniture (including TV/radio/ refrigerator/
AC/other gadgets). In case such furniture
is hired from a third party, the value of
unfurnished accommodation would be
increased by the hire charges paid/payable
by the employer. However, any payment
recovered from the employee towards the
above would be reduced from this amount.

8
3.3 Value of hotel accommodation provided
by the employer- The value of perquisite
arising out of the above would be 24% of
salary or the actual charges paid or payable
to the hotel, whichever is lower. The above
would be reduced by any rent actually paid
or payable by the employee.

It may be noted that no perquisite would arise, if;

• The employee is provided such

accommodation on transfer from one place
to another for a period of 15 days or less.

• The employee is provided such

accommodation at a mining/ oil
exploration/ project execution/ Dam/
Power generation/ off- shore site located in
remote area or being of temporary nature
having plinth area < 800sq. ft and not less
than 8 kms away from municipality or
cantonment limits.

9
3.4 Perquisite of motor car provided by the
employer–

a) Nil, if the motor car is used by the employee

wholly and exclusively in the performance
of his official duties.

b) Actual expenditure incurred by the

employer on the running and maintenance
of motor car, including remuneration to
chauffeur as increased by the amount
representing normal wear and tear of the
motor car and as reduced by any amount
charged from the employee for such use (in
case the motor car is exclusively for private
or personal purposes of the employee or
any member of his household).

c) Rs. 1800/- (plus Rs. 900/-, if chauffeur is

also provided) per month (in case the motor
car is used partly in performance of duties
and partly for private or personal purposes
of the employee or any member of his
household if the expenses on maintenance
and running of motor car are met or

10
 reimbursed by the employer). However, the
value of perquisite will be Rs. 2400/- (plus
Rs. 900/-, if chauffeur is also provided) per
month if the cubic capacity if engine of the
motor car exceeds 1.6 litres.

d) Rs. 600/- (plus Rs. 900/-, if chauffeur is

also provided) per month (in case the motor
car is used partly in performance of duties
and partly for private or personal purposes
of the employee or any member of his
household if the expenses on maintenance
and running of motor car for such private or
personal use are fully met by the employee).
However, the value of perquisite will be Rs.
900/- (plus Rs. 900/-, if chauffeur is also
provided) per month if the cubic capacity of
engine of the motor car exceeds 1.6 litres.

If the motor car or any other automotive

conveyance is owned by the employee but the
actual running and maintenance charges are
met or reimbursed by the employer, the method
of valuation of perquisite value is different. (See
Rule 3(2)).

11
THE SUMMARIZED TABLE IS AS UNDER:-

S. Circumstances Engine Capacity upto Engine Capacity

No. 1600 cc above 1600 cc
1 Where the motor car is owned or hired by the employer
(a) is used wholly Fully Exempt.
and exclusively in the Provided that specified documents are
performance of his maintained by the employer.
official duties;
(b) is used exclusively Actual amount of expenditure incurred by the
for the private or employer on the running and maintenance of
personal purposes motor car during the relevant previous year
of the employee including remuneration, if any, paid by the
or any member employer to the chauffeur as increased by the
of his household amount representing normal wear and tear* of
and the running the motor car and as reduced by any amount
and maintenance charged from the employee for such use.
expenses are met or
reimbursed by the
employer;
(c) is used partly in
the performance of
duties and partly for
private or personal
purposes of his own
or any member of his
household and -
(i) the expenses on Rs. 1,800 (plus Rs. Rs. 2,400 (plus Rs.
maintenance and 900, if chauffeur is also 900, if chauffeur is
running are met or provided to run the also provided to run
reimbursed by the motor car) the motor car)
employer;
(ii) the expenses Rs. 600 (plus Rs. Rs. 900 (plus Rs. 900,
on running and 900, if chauffeur is if chauffeur is also
maintenance for also provided by the provided to run the
private or personal employer to run the motor car)
use are fully met by motor car)
the assessee

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2 Where the employee owns a motor car but the actual running and
maintenance charges (including remuneration of the chauffeur, if any)
are met or reimbursed to him by the employer
(i) such
reimbursement is
for the use of the
vehicle wholly and
exclusively for official
purposes;
(ii) such Subject to maintaining Subject to
reimbursement is specified documents maintaining
for the use of the by employer, the specified documents
vehicle partly for actual amount of by employer, the
official purposes and expenditure incurred actual amount
partly for personal by the employer as of expenditure
or private purposes reduced Rs. 1800 (plus incurred by the
of the employee or Rs. 900, if chauffeur is employer as reduced
any member of his also provided by the by Rs. 2400 (plus Rs.
household. employer to run the 900, if chauffeur is
motor car) also provided to run
the motor car)
3 Where the employee owns any other automotive conveyance but the
actual running and maintenance charges are met or reimbursed to him
by the employer
(i) such Fully Exempt Not applicable
reimbursement is Provided that specified
for the use of the documents are
vehicle wholly and maintained by the
exclusively for official employer.
purposes;
(ii) such Subject to maintaining
reimbursement is specified documents
for the use of vehicle by employer, the actual
partly for official amount of expenditure
purposes and partly incurred by the
for personal or employer as reduced by
private purposes of the amount of Rs. 900.
the employee.

13
* The normal wear and tear of a motor-car shall be
taken at 10 per cent per annum of the actual cost
of the motor-car or cars.

3.5 Perquisite arising out of supply of gas,

electric energy or water: This shall be
determined as the amount paid by the
employer to the agency supplying the
same. If the supply is from the employer’s
own resources, the value of the perquisite
would be the manufacturing cost per
unit incurred by the employer. However,
any payment received from the employee
towards the above would be reduced from
the amount [Rule 3(4)]

3.6 Free/Concessional Educational Facility:

Value of the perquisite would be the
expenditure incurred by the employer. If
the education institution is maintained &
owned by the employer, the value would be
nil if the value of the benefit per child is below
Rs. 1000/- P.M. or else the reasonable cost
of such education in a similar institution in
or near the locality. [Rule 3(5)].

14
 Facility Value of perquisite if Value of perquisite if
extended to provided in the school provided in any other
owned by the employer school
Children Cost of such education Amount incurred less
in similar school less Rs. amount recovered from
1,000 per month per child employee (an exemption
(irrespective of numbers of Rs. 1,000 per month per
of children) less amount child is allowed)
recovered from employee
Other family Cost of such education in Cost of such education
member similar school less amount incurred
recovered from employee
Other Educational Facilities
• Reimbursement of school fees of children or family member of employees
- Fully Taxable
• Free educational facilities/ training of employees - Fully exempt

3.7 Free/Concessional journeys provided by

an undertaking engaged in carriage of
passengers or goods: Value of perquisite
would be the value at which such amenity
is offered to general public as reduced
by any amount, if recovered from the
employee. However, these provisions are
not applicable to the employees of an airline
or the railways.

3.8 Provision for sweeper, gardener,

watchman or personal attendant: The
value of benefit resulting from provision of

15
any of these shall be the actual cost borne
by the employer in this respect as reduced
by any amount paid by the employee for
such services. (Cost to the employer in
respect to the above will be salary paid/
payable). [Rule 3(3)].

16
 4. VALUE OF CERTAIN OTHER
FRINGE BENEFITS

(a) Interest free/concessional loans– The

value of the perquisite shall be the excess
of interest payable at the prescribed
interest rate over, interest, if any, actually
paid by the employee or any member of his
household. The prescribed interest rate
would be the rate charged by State Bank
of India as on the 1st Day of the relevant
Previous Year in respect of loans of the
same type and for same purpose advanced
by it to general public. Perquisite is to be
calculated on the basis of the maximum
outstanding monthly balance method.
However, loans upto Rs. 20,000/-, loans
for medical treatment specified in Rule
3A are exempt provided the same are not
reimbursed under medical insurance.

(b) Value of free meals- The perquisite value

in respect of free food and non-alcoholic

17
 beverages provided by the employer, to an
employee shall be the expenditure incurred
by the employer as reduced by the amount
paid or recovered from the employee for such
benefit or amenity. However, no perquisite
value will be taken if food and non-alcoholic
beverages are provided during working
hours and certain conditions specified
under Rule 3(7)(iii) are satisfied.

(c) Value of gift or voucher or token– The

perquisite value in respect of any gift, or
voucher, or taken in lieu of which such gift
may be received by the employee or member
of his household from the employer, shall
be the sum equal to the amount of such gift,
voucher or token. However, no perquisite
value will be taken if the value of such gift,
voucher or taken is below Rs. 5000- in the
aggregate during the previous years.

(d) Credit card provided by the employer–

The perquisite value in respect of expenses

18
 incurred by the employee or any of his
household members, which are charged
to a credit card provided by the employer,
which are paid or reimbursed by such
employer to an employee shall be taken
to be such amount paid or reimbursed by
the employer. However, no perquisite value
will be taken if the expenses are incurred
wholly and exclusively for official purposes
and certain conditions mentioned in Rule
3(7)(v) are satisfied.

(e) Club membership provided by the

employer– The perquisite value in respect of
amount paid or reimbursed to an employee
by an employer, against the expenses
incurred in a club by such employee or any
of his household members shall be taken
to be such amount incurred or reimbursed
by the employer as reduced by any amount
paid or recovered from the employee on
such account. However, no perquisite value
will be taken if the expenditure is incurred
wholly and exclusively for business

19
 purposes and certain conditions mentioned
in Rule 3(7)(vi) are satisfied.

4.1 The value of any other benefit or amenity

provided by the employer shall be determined
on the basis of cost to the employer under
an arms’ length transaction as reduced by
the employee’s contribution.

4.2 The fair market value of any specified

security or sweat equity share, being an
equity share in a company, on the date
on which the option is exercised by the
employee, shall be determined as follows:-

(a) In a case where, on the date of exercising

of the option, the share in the company is
listed on a recognized stock exchange, the
fair market value shall be the average of the
opening price and closing price of the share
on the date on the said stock exchange.

(b) In a case where, on the date of exercising of

the option, the share in the company is not
listed on a recognized stock exchange, the

20
 fair market value shall be such value of the
share in the company as determined by a
merchant banker on the specified date.

(c) The fair market value of any specified

security, not being an equity share in a
company, on the date on which the option
is exercised by the employee, shall be such
value as determined by a merchant banker
on the specified date.

4.3 Use of Movable Assets [Section 17(2)(viii)

read with Rule 3(7)(vii) ]

Taxable value of perquisites shall be

1) For use of Laptops and Computers - Nil

2) For movable asset other than Laptops,

computers and Motor Car - 10% of original
cost of the asset (if asset is owned by the
employer) or actual hire charges incurred
by the employer (if asset is taken on rent)
less amount recovered from employee.

21
4.4 Transfer of Movable Assets[ Section 17(2)
(viii) read with Rule 3(7)(viii) ]

Taxable value of perquisites shall be:

a. Computers, Laptop and Electronics items:

Actual cost of asset less depreciation at
50% (using reducing balance method) for
each completed year of usage by employer
less amount recovered from the employee

b. Motor Car: Actual cost of asset less

depreciation at 20% (using reducing
balance method) for each completed year of
usage by employer less amount recovered
from the employee

c. Other movable assets: Actual cost of asset

less depreciation at 10% (on SLM basis) for
each completed year of usage by employer
less amount recovered from the employee.

22
4.5 Medical facilities in India [Proviso to
section 17(2)]

a. 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:-

i.) Hospital maintained by the employer.

ii.) Hospital maintained by the Government

or Local Authority or any other hospital
approved by Government for the
treatment of its employees.

iii.) Hospital approved by the Principal

Chief Commissioner or Chief
Commissioner having regard to the
prescribed guidelines for treatment of
the prescribed diseases.

b. Medical insurance premium paid or

reimbursed by the employer is not
chargeable to tax.

23
c. Any other expenditure incurred or
reimbursed by the employer for providing
medical facility in India is not chargeable
to tax up to Rs. 15,000 in aggregate per
assessment year.

4.6 Medical facilities outside India [Proviso

to section 17(2) ]

Any expenditure incurred or reimbursed

by the employer for medical treatment of
the employee or his family member outside
India is exempt to the extent of following
(subject to certain conditions):

a. Expenses on medical treatment - exempt to

the extent permitted by RBI.

b. Expenses on stay abroad for patient and one

attendant - exempt to the extent permitted
by RBI.

c. Expenditure incurred on travelling of

patient and one attendant- exempt, if
Gross Total Income (before including the

24
 travel expenditure) of the employee, does
not exceed Rs. 2,00,000/-.

4.7 Leave Travel Concession (LTC/LTA)

[Section 10(5) read with rule 2B ]

The exemption shall be limited to fare for

going anywhere in India along with family
twice in a block of four years:

• Where journey is performed by Air -

Exemption up to Air fare of economy
class in the National Carrier by the
shortest route

• Where journey is performed by Rail -

Exemption up to air-conditioned first
class rail fare by the shortest route

• If places of origin of journey and

destination are connected by rail but
the journey is performed by any other
mode of transport - Exemption up to
air-conditioned first class rail fare by
the shortest route.

25
 • Where the places of origin of journey and
destination are not connected by rail:

- Where a recognized public

transport system exists -
Exemption up to first Class or
deluxe class fare by the shortest
route

- Where no recognized public

transport system exists -
Exemption up to air conditioned
first class rail fare by shortest
route.

Notes:

1. Two journeys in a block of 4 calendar years

is exempt

2. Taxable only in case of Specified Employees

[See Explanations]

26
 5. DEFINITION OF SPECIFIED
EMPLOYEE

The following employees are deemed as

specified employees:

1) A director-employee

2) An employee who has substantial interest

(i.e. beneficial owner of equity shares
carrying 20% or more voting power) in the
employer-company

3) An employee whose monetary income*

under the salary exceeds Rs.50,000.

* Monetary Income means Income chargeable under the

salary but excluding perquisite value of all non-monetary
perquisites.

27
 6. MEANING OF AN ALLOWANCE

An allowance is the financial benefit given

to the employee by the employer over and above
the regular salary. These benefits are provided to
cover particular expenses whether personal or for
discharge of his duties for example Conveyance
Allowance is paid to foot expenses incurred
for commuting to workplace. Some of these
allowances are taxable under the head salary. A
few of them again could be partly taxable and few
others are non-taxable or fully exempt from taxes.

Here is a glance at allowances that are taxable,

partly taxable or non-taxable:

6.1 Taxable Allowances:

1. Dearness Allowance: Dearness Allowance

(DA) is an allowance paid to employees as
a cost of living adjustment allowance paid
to the employees to cope with inflation.
DA paid to employees is fully taxable with

28
 salary. The IT Act mandates that tax liability
for DA along with salary must be declared
in the filed return.

2. Entertainment Allowance: Government

employees are allowed the deduction of
lowest of the following amounts - one-fifth
of basic salary, actual amount received as
allowance or Rs. 5,000. This is an allowance
provided to employees to reimburse the
expenses incurred on the hospitality
of customers. However, Government
employees can claim exemption in the
manner provided in section 16 (ii). All other
employees have to pay tax on it.

3. Overtime Allowance: Employers may

provide an overtime allowance to employees
working over and above the regular work
hours. This is called overtime and any
allowance received for this is fully taxable.

4. City Compensatory Allowance: City

Compensatory Allowance is paid to
employees in an urban centre which may

29
 be highly expensive and to cope with the
inflated living costs in the cities. This
allowance is fully taxable.

5. Interim Allowance: When an employer

gives any Interim Allowance in lieu of final
allowance, this becomes fully taxable.

6. Project Allowance: When an employer

provides an allowance to employees to meet
project expenses, this is also fully taxable.

7. Tiffin/Meals Allowance: Sometimes

employers may provide Tiffin/Meals
Allowance to the employees. This is fully
taxable.

8. Cash Allowance: When the employer

provides a cash allowance like marriage
allowance, bereavement allowance or
holiday allowance, it becomes fully taxable.

9. Non-Practicing Allowance: When

physicians are attached to Clinical Centers
of the various Laboratories/Institutes, any

30
 non-practicing allowance paid to them
become fully taxable.

10. Warden Allowance: When an employer

pays an allowance to an employee working
as a Warden i.e. Keeper in an educational
Institute, the allowance received is fully
taxable.

11 Servant Allowance: When an employer

pays an employee to engage services of a
servant, such an allowance is taxable.

12. Fixed Medical Allowance: This is an

allowance paid by the employer to the
employee at fixed rates irrespective of any
treatment taken by the employee.

6.2 Partly Taxable:

1. House Rent Allowance (HRA): When

an employer pays an allowance for the
employees accommodation it is called
House Rent Allowance. Tax exemption

31
 under section 10 (13A) can be claimed on
whichever amount is lower of the three:

i) HRA as per actual received by the

employee

ii) Rent actually paid less 10% of Basic

Salary

iii) In Metros i.e Delhi, Mumbai, Chennai

or Kolkata, as much as 50% of
basic salary or else 40% of it if the
accommodation is in a non-metro.

Any amount of House Rent Allowance received

after claiming such deduction is taxable.

2. Special Allowance: A special allowance

paid to employees is covered under section
10(14)(i) and does not fall within the
purview of a perquisite. It is essentially
for performance of a duty is not taxable
to the extent to which it has been actually
incurred.

32
3. Children education allowance: Exempt
upto Rs. 100/- per month per child for a
maximum of two children. Similarly, hostel
subsidy of Rs. 300/- per month per child
for a maximum of two children is exempt.

4. Transport Allowance: Rs. 800/- (

Rs.1600/- for blind or orthopedically
handicapped with disability of lower limbs)
per month exempt for the purpose of
commuting between residence and place of
duty. (Rule 2BB)

6.3 Non-Taxable:

Some of the allowances, usually paid

to Government servants, judges and
employees of UNO are not taxable. These
are:

1. Allowances paid to Govt. servants

abroad: When servants of Government of
India are paid an allowance while serving
abroad, such income is fully exempt from
taxes.

33
2. Sumptuary allowances: Sumptuary
allowances paid to judges of HC and SC are
not taxed.

3. Allowance paid by UNO: Allowances

received by employees of UNO are fully
exempt from tax.

4. Compensatory allowance paid to judges:

When a judge receives compensatory
allowance, it is not taxable.

34
7. SOME EXAMPLE OF SALARY

Some simple illustrative examples of valuation

of perquisites are given below with regard to
the provisions as they stand w.e.f 1/4/2015:

1) Mr. X and Ms. Y are employees of/in

Company A (i.e. an employer other than
the Central Government or any State
Government). Company A has total of 10
employees including Mr.X and Ms. Y.

Mr. X is provided with furnished

accommodation in a city with a population
exceeding 10 lakhs but not exceeding
25 Lakhs as per the 2001 census. The
accommodation provided to Mr. X is owned
by the employer and has an estimated fair
market value Rs. 25 lakhs. The furniture and
fixture provided with the accommodation
is also owned by the employer and was
bought at a cost of Rs.1 lakh. Mr. X pays
a nominal amount of Rs.500 per month for
the furnished accommodation. Mr. X has a
salary of RS.80,000/- per month exclusive of
the value of perquisites. He is also provided

35
 with a sweeper who receives a salary of
Rs.2000 per month for services to Mrs.X.
Mr.X pays nothing to the employer for his
benefit. Mr. X is provided by the employer
with a car and driver only for travel to and
from residence to the place of work.

Ms. Y is provided with an unfurnished

accommodation in the same city as Mr. X.
This accommodation is not owned by the
employer but taken on a lease of Rs.6000 per
month. She does not pay the employer any
amount for the use of the accommodation.
Ms.Y also has a salary of Rs.80,000/- per
month exclusive of the value of perquisites.
Ms. Y has her gas bills paid by the employer.
They amount to Rs.100 per month and
Ms.Y pays nothing to the employer for the
benefit. Ms. Y is also provided with a laptop
computer that costs Rs.1 lakh.

The employer also make an expenditure

of Rs.1 lakh per year for providing health
cub facilities to it 10 employees. Mr.X uses
these facilities regularly but Ms. Y rarely
uses these facilities.

The valuation of perquisites for Mr.X and

Ms. Y are given below:

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 Mr.X Ms.Y
Value of furnished Value of unfurnished
accommodation owned accommodation taken
by employer: on lease rent:
10% of salary – Actual amount of lease
Rs.96000/-per year rent paid/payable
by the employer
Plus value of furniture
(Rs.72,000 per year)
& fixture:
or 15% of the salary
10% of cost per annum (Rs.1,44,000 per year),
– Rs.10000/- per year Whichever is lower:
Less amount paid:- Therefore, value of
RS.6,000/- this perquisite is
Rs.72,000/- per year.
Therefore value of
this perquisites is
Rs.1,00,000/- per year
Note: The fair market
of the accommodation
is not relevant for this
calculation.
Value of benefit of Provision of gas
sweeper- Rs.24,000/- Rs.1200/- per year.
per year.
The provision of the Provision of movable
car and driver only asset in the case of a
for travel to and from laptop is exempt.
residence to the place
of work is not taxable
in hands of employee.
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Note 1 The value of taxable perquisites as given
above shall be included in the salary
income of Mr. X and Ms. Y respectively.
This in turn, would be a part of the total
income of Mr. X and Ms. Y. It would be
liable to income tax at the prevailing
rates in the hands of the employees,
namely Mr. X and Ms. Y.
Note 2 The provision of health club facilities
is exempt from tax. As in the above
example use of health club, sports and
similar facilities provided uniformly to
all employees
2) Mr. A and Mr. B are government
employees. Mr. A resides in an
unfurnished accommodation provided
by the government that has a license
fees of Rs.500/- per month as per
government rules. He pays Rs.500/- per
month as license fee to the government.
He receives transport allowance of
Rs.800/- per month for commuting
to and from his residence to place of
work. Mr. B is provided with a furnished
accommodation by the government. The
license fee for the accommodation is
Rs.500/- per month as per government
rules. He pays Rs.500/- per month as
license fees to the government. The
38
 furniture and fixtures provided with the
accommodation is also owned by the
employer and was bought at a cost of
Rs.20,000/-. Mr. B pays Rs.50/- per
month for the furniture fixture provided.
He also receives the benefit of a car and
a driver for commuting to and from his
residence to place of work.
The valuation of perquisites for Mr. A and Mr. B
are given below:-

Mr. A Mr. B

Value of unfurnished Value of unfurnished

accommodation accommodation:
License fee as License fee as
determined by determined by
government- government:-
Rs. 6,000/- per year
Rs. 6000/- per year
Less amount paid- Plus value of furniture
Rs. 6,000/- per year and fixtures:
Therefore, value of 10% of cost per
this perquisite is Nil. annum- Rs. 2000/-
per year

39
 Less amount paid
Rs.6000/- per year
license fee and
Rs.600/- per year for
furniture & fixtures.
Therefore, value of
this perquisite is
Rs.1400/- per year.

Transport allowance The provision of the

up to Rs.1600/- per car and driver only
month for commuting for travel to and from
to and from his residence to the place
residence to place of of work is exempt.
work is exempt.

40