The rules for valuation of perquisite given by employer to employees are as under : –
I. Residential accommodation provided by the employer:
A] Value of Furnished rent free accommodation
Value of Unfurnished accommodation
Plus: 10% per annum of cost of furniture, if the furniture is owned by owned by the employer or actual rent of furniture
B] Value of Unfurnished rent free accommodation
i) Central and State Government employees
License fee of House determined will be taxable
ii) Private sector employees or other employees
a) If it is owned by employer
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- City having population upto 10 lakhs as per 2001 census – 5% of Salary
- City having population exceeding 10 lakhs but upto 25 lakhs as per 2001 census – 10% of Salary
- City having population exceeding 25 lakhs as per 2001 census – 15% of Salary
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b) If taken on leased by employer
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- Actual lease rent paid by employer
- 15% of Salary
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Whichever is less will be taxable
C) Taxability for Hotel Accommodation
a) If Hotel Accommodation is unfurnished
It is not taxable
b) If Hotel Accommodation is furnished
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- Actual charges paid or payable for such hotel
- 24% of the salary
Whichever is less will be taxable
Note: If the hotel accommodation is provided for not more than 15 days on transfer of employee from one place to another then it will not be taxable.
II. Personal attendants etc.:
The value of free service of all personal attendants including a sweeper, gardener and a watchman is to be taken at actual cost to the employer. Where the attendant is provided at the residence of the employee, full cost will be taxed as perquisite in the hands of the employee irrespective of the degree of personal service rendered to him. Any amount paid by the employee for such facilities or services shall be reduced from the above amount.
III. Gas, electricity & water:
For free supply of gas, electricity and water for household consumption, the rules provide that the amount paid by the employer to the agency supplying the amenity shall be the value of perquisite. Where the supply is made from the employer’s own resources, the manufacturing cost per unit incurred by the employer would be taken for the valuation of perquisite. Any amount paid by the employee for such facilities or services shall be reduced from the above amount.
IV. Free or concessional education:
Perquisite on account of free or concessional education shall be valued in a manner assuming that such expenses are borne by the employee, and would cover cases where an employer is running, maintaining or directly or indirectly financing the educational institution. Any amount paid by the employee for such facilities or services shall be reduced from the above amount. However, where such educational institution itself is maintained and owned by the employer or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality if the cost of such education or such benefit per child exceeds Rs.1000/- p.m.
V. Interest free or concessional loans
It is common practice, particularly in financial institutions, to provide interest free or concessional loans to employees or any member of his household. The value of perquisite arising from such loans would be the excess of interest payable at prescribed interest rate over interest, if any, actually paid by the employee or any member of his household. The prescribed interest rate would now be the rate charged per annum by the State Bank of India as on the 1st day of the relevant financial year in respect of loans of same type and for the same purpose advanced by it to the general public. Perquisite value would be calculated on the basis of the maximum outstanding monthly balance method. For valuing perquisites under this rule, any other method of calculation and adjustment otherwise adopted by the employer shall not be relevant.
However, small loans up to Rs. 20,000/- in the aggregate are exempt. Loans for medical treatment specified in Rule 3A are also exempt, provided the amount of loan for medical reimbursement is not reimbursed under any medical insurance scheme. Where any medical insurance reimbursement is received, the perquisite value at the prescribed rate shall be charged from the date of reimbursement on the amount reimbursed, but not repaid against the outstanding loan taken specifically for this purpose.
VI. Use of assets:
It is common practice for an asset owned by the employer to be used by the employee or any member of his household. This perquisite is to be charged at the rate of 10% of the original cost of the asset as reduced by any charges recovered from the employee for such use. However, the use of Computers and Laptops would not give rise to any perquisite.
VII Transfer of assets:
Often an employee or member of his household benefits from the transfer of movable asset (not being shares or securities) at no cost or at a cost less than its market value from the employer. The difference between the original cost of the movable asset(not being shares or securities) and the sum, if any, paid by the employee, shall be taken as the value of perquisite. In case of a movable asset, which has already been put to use, the original cost shall be reduced by a sum of 10% of such original cost for every completed year of use of the asset. Owing to a higher degree of obsolescence, in case of computers and electronic gadgets, however, the value of perquisite shall be worked out by reducing 50% of the actual cost by the reducing balance method for each completed year of use. Electronic gadgets in this case means data storage and handling devices like computer, digital diaries and printers. They do not include household appliance (i.e. white goods) like washing machines, microwave ovens, mixers, hot plates, ovens etc. Similarly, in case of cars, the value of perquisite shall be worked out by reducing 20% of its actual cost by the reducing balance method for each completed year of use.
VIII. Motor car provided by the employer:
1. If motor car is owned or leased by the employer
a) Used exclusively for official purpose
If the car is used for only official purpose, it will not be taxable in the hands of employee irrespective of cubic capacity of engine.
b) Used for both official and personal purpose
i) If running and maintenance cost is reimbursed by the employer
Cubic Capacity within 1.6 litre – Rs 1,800 p.m. + Rs 900 p.m. (If driver is provided)
Cubic Capacity exceeding 1.6 litre – Rs 2,400 p.m. + Rs 900 p.m. (If driver is provided)
ii) If running and maintenance cost is reimbursed by the employee
Cubic Capacity within 1.6 litre – Rs 600 p.m. + Rs 900 p.m. (If driver is provided)
Cubic Capacity exceeding 1.6 litre – Rs 900 p.m. + Rs 900 p.m. (If driver is vided)
c) Used exclusively for personal purpose
If the car is used for only personal purpose, it will be fully taxable in the hands of employee irrespective of cubic capacity of engine.
The taxable value is as under:
Actual cost of Running and Maintenance of motor car
Plus: driver’s salary
Plus: normal wear and tear @10% per annum of the actual cost of motor car
Less: any charges recovered from the employe
2. If motor car is owned by the employee but running and maintenance and driver’s salary reimbursed by employer:
a) Used exclusively for official purpose
If the car is used for only official purpose, it will not be taxable in the hands of employee irrespective of cubic capacity of engine.
b) Used for both official and personal purpose
If running and maintenance cost is reimbursed by the employer
Cubic Capacity within 1.6 litre – Actual expenses less Rs 2,700 p.m.
Cubic Capacity exceeding 1.6 litre – Actual expenses less Rs 3,300 p.m.
3. If Employee owns any other automotive conveyance but running and maintenance is reimbursed by employer
a) Used exclusively for official purpose
If the car is used for only official purpose, it will not be taxable in the hands of employee if cubic capacity of engine is within 1.6 litre.
b) Used for both official and personal purpose
If running and maintenance cost is reimbursed by the employer
Cubic Capacity within 1.6 litre – Actual expenses less Rs 900 p.m.
Cubic Capacity exceeding 1.6 litre – Not Applicable
It is pertinent to mention that benefits specifically exempt u/s 10(13A), 10(5), 10(14), 17 etc. would continue to be exempt. These include benefits like travel on tour and transfer, leave travel, daily allowance to meet tour expenses as prescribed, medical facilities subject to conditions.
Republished with Amendments
Sir,
I stayed in Company provided accommodation (Company owned building) for 3 months. (April-June)
while calculating perquisite, they have included entire performance pay which is my annual payout for previous year’s performance.
i had received it in May.
logic given is:
it is done on payment received basis, and though annual payout, it cannot be prorated on monthly basis.
are they doing correctly?