Rule 3(7)(i): Interest free / concessional loan Any loan given free of interest or concessional interest shall be a taxable perquisite and calculated as follows: • Interest calculated at the rate charged by State Bank of India as on 1st day of pr

Salary is the remuneration received by or accruing to an individual, periodically, for service rendered as a result of an express or implied contract. The actual receipt of salary in the previous year is not material as far as its taxability is concerned. The existence of employer-employee relationship is the sine-qua¬non for taxing a particular receipt under the head salaries.

Perquisites taxable in the hands of the employee as a part of salary income Broadly, in this system, the perquisites taxable in the hands of the employee as a part of salary income include: 1) Value of rent-free or concessional rent accommodation provided by the employer.2) Value of any benefit/amenity granted free or at concessional rate to specified employees, etc. Specified employees are company directors, employees with substantial interest in the company and any other employee whose salary income exclusive of non-monetary benefits and amenities exceeds Rs. 50,000/-.

At the outset, it was submitted by the learned AR that the first common ground raised by the assessees in the present appeals relating to exemption u/s 10(10CC) is covered by the decision of the Special Bench of the Tribunal in the case of RBF Rig Corpn. LLC (RBFRC) Vs. Asstt. Commissioner of Income Tax – 109 ITD 141 wherein it was concluded that payment of taxes by the employer, on behalf of the employee, is a perquisite within the meaning of clause (2) of section 17 of the Income

A number of representations have been received regarding deduction under Section 80 CCD for contribution made under pension scheme in the light of Circular No-1 /2010 dated 11th Jan’2010 issued on the subject of Deduction of Tax at Source etc.

The Finance Act, 2005 introduced a levy namely Fringe Benefit Tax (FBT) on the value of certain fringe benefits as contained in Chapter XII H (Sections 115 W to 115 WL) of Income Tax Act, 1961. By the Finance (No. 2) Act, 2009 a new Section 115 WM was inserted to abolish the FBT with effect from Assessment Year (A.Y.) 2010-11. Consequently, benefits given to employees are taxed as perquisites in the hands of employees in terms of amendments to Clause 2 of Section 17 of Income Tax Act, 1961.

The fringe benefit tax (FBT) was strongly opposed by India Inc, but there is no doubt that it was beneficial to the employees — they did not have to directly bear the tax on many perquisites. The repeal of FBT meant uncertainty on taxation of perks. Thankfully, there are few changes to the valuation rules when compared to the rules that existed prior to the introduction of FBT.

Way back on September 25, 2000, Rule 3 governing perquisites (perks) was amended by Notification SO 940(E). The major change brought in was taxing on a ‘cost to employer’ basis, thereby giving perks the colour and character of salary. This in turn resulted in many employers increasing the salary of the employee instead of granting perks, thereby avoiding the requirement to maintain cumbersome records.

The salaried class, reeling under the inflationary pressures, has suffered yet another setback this holiday season with the announcement of new perquisite valuation rules by the Central Board of Direct Taxes (CBDT) on December 18. The new rules have come in the wake of the abolishment of fringe benefit tax (FBT) by finance minister Pranab Mukherjee in this year’s Budget and will be applicable retrospectively from April 1, 2009.

Valuation of Perquisites under Rule 3 of Income Tax Rule 1962 read with sub section 2 of section 17 of Income Tax Act, 1961 (As Revised wide Income Tax (Thirteenth Amendment) Rules. 2009). The Finance (No. 2) Act, 2009, has withdrawn the levy of Fringe Benefit Tax (“FBT”) on expenditure incurred by an employer on or after 1 April 2009. Consequently, by an employee benefits which were subject to FBT have been brought back within the ambit of perquisites and taxable in the hands of employees from the financial year (“F.Y.”) 2009-10 onwards.