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PERQUISITES
 Benefits attached to a job
 May be in cash (monetary) or in kind (non-monetary)

Classification of Perks:
 Tax free perks;
 Taxable perks
 Perks taxable for both specified and non-specified employees
 Perks taxable for specified employees only.

Classification --- I: Tax-free perks (or) Exempted perks

 Medical bills reimbursed (refer provisions on medical facilities)
 Telephone bills reimbursed
 Use of employer’s laptops and computers
 Free refreshments during office hours
 Free lunch provided during office hours up to a maximum of Rs.50 per meal
 Leave travel concession
 Interest-free loans or concessional loans taken for medical treatment
 Interest-free loans or concessional loans where the loan amount does not exceed Rs.20,000.
 Gift in kind if the value of the gift does not exceed Rs.5,000
 Medical insurance premium paid by employer on the health of employees
 Privilege passes granted by Indian Railways to its employees
 Perks provided by Government of India to its employees posted abroad u.s.10 (7)
 Free education facility in a school owned/maintained by the employer for employee’s children
 Tax paid by the employer on non-monetary perquisites

Specified employee:
 A Director-employee
 An employee who owns 20% equity shares in the employer-company; (i.e. having substantial
interest)
 An employee whose monetary emoluments exceed Rs.50,000 after deductions u.s.16.

Classification --- II: Perks taxable for both specified and non-specified employees:
a. Rent-free accommodation
b. Any obligation of employee met by the employer
c. Fringe benefits

Classification --- II: a) Rent free accommodation:

Unfurnished accommodation
Furnished accommodation
Accommodation provided at concessional rent

For Government employees:

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The taxable value of RFA in the case of a Government employee is as per Government rules.

For Non-Government employees:

The taxable value of rent-free accommodation for other employees (semi-Government or non-
Government employees) is determined as under:

Population of the City House owned by House leased by

employer employer
Less than 15 lakhs 5% of salary 10% of salary or lease rent
(w.e.l) is taxable
More than 15 lakhs but less 7.5% of salary As above
than 40 lakhs
More than 40 lakhs 10% of salary As above

Salary: Basic + D.A. (forming) + Commission (any) + Bonus + Fees + All taxable allowances to the
extent taxable

Accommodation provided in a REMOTE AREA or in an OFFSHORE INSTALLATION is exempt.

Accommodation provided in a HOTEL on account of TRANSFER of an employee from one place to

another place:
 fully exempt if the period of stay does not exceed 15 days
 if accommodation is provided for a period exceeding 15 days then the taxable value
will be 24% of salary for such period or actual hotel charges (whichever is less)

Rent free accommodation with furniture being provided:

If the employer owns the furniture then 10% of cost of furniture is taxable
Actual hire charges will be taxable if the furniture is hired by the employer.

note: Written down value of the furniture is not relevant.

note: “Furniture” includes radio sets, television sets, refrigerators, air-conditioners and other
household appliances.

Classification --- II: b) Any obligation of employee met by the employer:

 Servant engaged by employee but salary paid or reimbursed by employer
 Gas, electricity, water bills of employee but paid or reimbursed by employer
 Education expenditure of the employee’s children paid or reimbursed by employer
 Car owned by employee but expenses met by employer
 Professional tax paid by employer on behalf of employee

Classification --- II: c) Fringe benefits:

 Interest-free loans or loans at concessional rate of interest
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 Use of moveable assets belonging to the employer

 Transfer of moveable assets belonging to the employer
 Gift from employer
 Credit card facility
 Club facility
 Travelling, touring, accommodation facility provided to the employee

Fringe Benefit 1: Interest-free loans or loans at concessional rate of interest

If the lending rate of the employer is less than the SBI rate, the
difference would be taxable. Interest will be calculated on the
OUTSTANDING BALANCE AT THE END OF EACH MONTH.

note: The above provision does not apply if the:

 loan is taken for medical treatment in respect of diseases specified in rule 3A; or
 loan amount does not exceed Rs.20,000 in aggregate (petty loans).

Fringe Benefit 2: Use of moveable assets by the employee belonging to the employer
Computers and laptops: Exempt
Any other asset: 10% p.a. of cost is taxable

Fringe Benefit 3: Transfer of moveable assets by the employer to his employee

Computers & its related
electronic items: Cost (-) depreciation @ 50% on w.d.v. method
Cars: Cost (-) depreciation @ 20% on w.d.v. method
Any other asset: Cost (-) depreciation @ 10% on straight line method.

note: Depreciation is to be calculated on basis of “completed year”.

note: Amount if any recovered from the employee shall have to be adjusted.
note: Transfer of assets (other than computer & car) which have been used by the employer for
more than ten years are exempt from tax.

Fringe Benefit 4: Free Gift:

a. Received in cash: Fully taxable
b. Received in kind: If the value of gift is less than Rs.5,000 : Fully
exempt
If the value of gift exceeds Rs.5,000 : Fully taxable

Fringe Benefit 5: Credit card facility:

a. Official use: Exempt
b. Private use: Fully taxable

Fringe Benefit 6: Club facility:

a. Official use: Exempt
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b. Private use: Fully taxable

Facility on sports or health club will be fully exempt

Fringe Benefit 7: Travelling, touring and accommodation facility:

a. Official tour: Exempt from tax
b. Personal purpose: Fully taxable

Classification --- III: Perks taxable for specified employees only

 Servant facility
 Gas, Electricity, Water facility
 Education facility
 Car facility

Gas, Electricity or Water facility:

 From employer’s own source: Manufacturing cost per unit is taxable
 If purchased from outside agency: Fully taxable

note: If gas, electricity or water bills are in the name of employee and if they are paid by employer
then it is taxable for both specified and non-specified employees.

Servant facility:
 Any servant (gardener, sweeper, watchman, cook) provided by employer to his employee
is fully taxable in the hands of a specified employee.

 But if these servants are employed by employee and if they are paid or reimbursed by
employer then it is taxable for both specified and non-specified employees.

Education Facility:

Particulars School owned/maintained by Any other school

Employer
 For children: Fully exempt if cost of education Fully taxable
does not exceed Rs.1,000 p.m.

Fully taxable if cost of education

exceeds Rs.1,000 p.m.

 Any household member: Fully taxable Fully taxable

 Taxable for: Both
Specified Employee only
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Note: Scholarships given to meet the cost of education is fully exempt from tax u.s.10 (16)

Provision of medical facilities:

a) Medical allowance: Fully taxable
b) Medical facility in a hospital maintained by employer: Exempt
c) Hospitals recognized by I.T. authorities (e.g. Public Hospitals): Exempt from tax
d) Medical reimbursement for treatment in a Private Hospital: Fully taxable
e) Medical insurance premium paid on the health of employees: Exempt from tax

f) Medical expenses incurred outside India:

a. Treatment expenses: Exempt to the extent permitted by RBI
b. Stay expenses: Exempt to the extent permitted by RBI
c. Travel expenses: Exempt if Gross Total Income does not exceed Rs.2 lakhs.

“Family” means the individual, spouse, children, dependant parents and dependent brothers and
sisters of the individual.

Leave Travel Concession:

LTC is exempt to the extent the amount is spent on travel to any place in India.
This exemption is available twice in a block of 4 calendar years (current block is 2022 to 2025).
Exemption is available to the extent of economy fare by air.
If the journey is performed by rail then first-class AC fare is exempt from tax.
Exemption is available in respect of shortest route.

Deductions from Gross Salary:

Standard deduction u/s.16(ia):
A deduction of Rs.50,000 or the amount of salary, whichever is less (Optional Tax Regime)
A deduction of Rs.75,000 or the amount of salary, whichever is less (Default Tax Regime)

Entertainment allowance u/s.16 (ii):

This deduction is available only for Government employees. E.A. received is first included in gross
salary and then allowed as deduction. Deduction is not available under Default Tax Regime.

Professional tax or employment tax under section 16 (iii):

Professional tax paid by employee is allowed as deduction u.s.16 (iii). If it is paid by employer on behalf
of employee then it is taxed as perk and the same amount is allowed as deduction. Not available under
DTR.

Provision relating to provident fund:

Particulars Statutory PF Recognised PF Unrecognised PF
Employers contribution Exempt Above 12% of Exempt
salary is taxable
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Interest on provident fund Exempt Above 9.5% of Exempt

contribution is taxable

Employees contribution Qualifies for Qualifies for Does not qualify

deduction u.s.80C deduction u.s.80C for deduction

Lumpsum received after

retirement Exempt Exempt (***)

Salary means basic + D.A. (forming) + Sales Commission

(***) Employers contribution and interest thereon is taxable under the head salary.

Interest on employee’s contribution is taxable under the head “Income from other sources”.

Problems On Rent-free Accommodation:

13. X an employee of ABC (P) Ltd., posted at Chennai (population > 40 lakhs), draws Rs.8,00,000 p.a. as
basic, Rs.5,00,000 p.a. as dearness allowance (forming) and Rs.3,00,000 p.a. as commission. Besides,
the company provides a rent-free unfurnished accommodation in Chennai. The house is owned by
the company. Determine the taxable value of the perk.

14. X, a Director-employee of a private company, draws Rs.80,000 p.m. as basic. D.A. (forming)
Rs.82,000 p.a.; Bonus 30% of basic; Commission Rs.3,000 p.m.; Transport allowance Rs.2,000 p.m.
for commuting between office and residence; Tribal area allowance Rs.12,400 and rent free house
(lease rent paid by the employer Rs.15,000 p.m.). The company recovers Rs.2,000 p.m. from his
salary for providing accommodation facility. Compute Income from salary under OTR/DTR.

15. Mr.A is working as a General Manager of a company. Particulars are given below:
Basic Rs.60,000 p.m.; Bonus Rs.40,000 p.a.; Conveyance allowance (70% official use) Rs.2,000 p.m.;
Medical allowance Rs.2,000 p.m. He has been provided with a rent free house in a city whose
population exceeds 15 lakhs but does not exceed 40 lakhs. Compute the taxable value of RFA if the
house is owned by the employer. What would be your answer if the house is taken on lease by the
employer at Rs.10,000 p.m.

16. Mr.R furnishes the following: Basic salary Rs.12,000 p.m.; Dearness allowance (40% of which
forms part of salary for retirement benefits) Rs.1,000 p.m.; Lunch allowance Rs.200 p.m.; Medical
allowance Rs.500 p.m.; City compensatory allowance Rs.300 p.m.; Children education allowance
Rs.230 p.m. per child for 2 children.

He is provided with a rent-free accommodation in Delhi. The cost of the furniture is Rs.1,00,000 and
two air-conditioners, which have been taken on hire by the employer, have also been provided in
the accommodation. The hire charges of each air conditioner is Rs.2,000 p.a. Compute the value of
the rent-free accommodation if the accommodation is provided by:

a. The Government and the value of the accommodation as per Govt. Rules is Rs.1,500 p.m.
b. Canara Bank and the accommodation has been taken on lease by the Bank at Rs.10,000 p.m.
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c. XYZ Ltd. and the accommodation has been taken on rent by the company at Rs.10,000 p.m.

17. Mr.S was provided an accommodation in a hotel by his employer for 22 days before providing him a
rent free accommodation. The hotel charges paid Rs.33,000 of which Rs.5,000 was recovered from
the employee. Salary for the purpose of accommodation for the period of 22 days is Rs.66,000.
Compute the taxable perquisite of accommodation.

Interest free loan or loans at concessional rate of interest.

18. X Ltd. has advanced an interest free loan of Rs.5,00,000 to Mr.G for purchase of car on 01.09.2024.
Mr.G has been regularly repaying the loan in instalments of Rs.20,000 p.m. at the end of each month.
Compute the value of perquisite on account of interest assuming the interest charged by SBI is 10%
p.a. What will be your answer if Mr.G repays loan on 1st of next month instead of end of each month.

Free Gas, Electricity and Water:

19. Find out the value of the perquisite in respect of gas in the cases given below:

X is employed by a gas supply company to whom free gas (manufacturing cost Rs.10,000) is supplied by
the employer.
Y is employed by A ltd. which supplies free gas to Y. Gas bills are issued in the name of A ltd. Rs.15,000.
Z is employed by B ltd. which supplies free gas to Z. Gas bills are issued in the name of Z Rs.18,000.

Assuming that X, Y and Z are “specified employees” and gas is used only for household consumption; find
out the value of the perquisite.

Use of moveable assets by the employee belonging to the employer:

20. Find out the taxable value of the perk in the following cases:

X is given a laptop by the employer-company for using it for office and private purpose (ownership
is not transferred). Cost of the laptop to the employer Rs.50,000.
On 1.10.2024, the company gives its music system to Y for domestic use. Ownership is not
transferred. Cost of music system to the employer is Rs.85,000.
Free use of employer’s LED TV from 1.4.2024. Cost to the employer Rs.1,00,000
On 1.09.2024, the company purchases a fridge for Rs.90,000 for the kitchen of X. Ownership is not
transferred.

Sale of assets by the employer to his employee:

21. On 10.3.2025, a Company sells imported furniture to X for Rs.90,000 (the furniture was purchased
by the company on 30.6.2020 for Rs.4,10,000 and since then it was used for business purposes).

On 01.03.2025, a Company purchases a music system for Rs.35,000 and the same is sold on the
same day to X for Rs.20,000.
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On 10.3.2025, the employer sells a computer to X for Rs.6,000 (it was purchased for Rs.60,000 on
10.4.2022, and up till its transfer to X, it was used by the employer for business purpose).

On 10.3.2025, the employer sells a Car for Rs.2,00,000 (it was purchased by the company for
business purposes on 10.4.2021 for Rs.6,00,000).

Problem on Servant facility

22. Mr.X and Mr.Y are working for Gama Ltd. As per salary fixation norms, the following perquisites
were offered:

i. For Mr.X, who engaged a domestic servant for Rs.4,000 per month, his employer reimbursed
the entire salary paid to the domestic servant i.e. Rs.4,000 per month.

ii. For Mr.Y, he was provided with a domestic servant @ Rs.4,000 per month as part of
remuneration package.

You are required to comment on the taxability of the above in the hands of Mr.X and Mr.Y,
who are not specified employees.

Problem on Leave Travel Concession:

23. Mr.R went to Simla on a holiday on 15.11.2024 with his wife and three children (one son – age 6
years; twin daughters – age 3 years). They went by aeroplane (economy class) and the total cost of
tickets met by his employer was Rs.58,000 (Rs.43,000 for adults and Rs.15,000 for the three minor
children). Compute the taxable amount of LTC.

Will the answer be different if, among his three children, the twins are 6 years and son 3 years old?

Deductions from Gross Salary:

24. Mr.G receives the following emoluments during the previous year ending 31.03.2025:
Basic pay Rs.4,00,000; Dearness Allowance Rs.15,000; Commission Rs.10,000; Entertainment
Allowance Rs.4,000; Medical expenses reimbursed for treatment in a public hospital Rs.25,000;
Professional tax paid Rs.3,000 (Rs.2,000 was paid by his employer). Determine Income from
Salary for A.Y.2025-26 if Mr.G is a State Government employee.

Problem on medical facilities:

25. Mrs.X is a tax consultant in A Ltd. (salary being Rs.1,76,000 p.a.). A Ltd. makes the following
expenses for medical treatment of her husband outside India during the previous year 2024-25:

Amount incurred Out of which

by A Ltd. permitted by RBI
Cost of medical treatment of X outside India Rs.6,90,000 Rs.6,30,000
Cost of stay abroad of X and Mrs.X Rs.3,70,000 Rs.3,60,000
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Cost of travel of X and Mrs.X Rs.1,40,000

Find out the taxable value of the medical facility chargeable to tax in the hands of Mrs.X for the
assessment year 2025-26 on the assumption that:
(a) Mrs.X does not have any other income or
(b) has interest on fixed deposit with SBI is Rs.10,000.

26. Compute the taxable value of the perquisite in respect of medical facilities received by Mr.G
from his employer during the previous year 2024-25:

 Medical Insurance Premium for insuring health of Mr.G Rs.7,000

 Treatment of Mr.G by his family doctor Rs.5,000
 Treatment of Mrs.G in a Government hospital Rs.25,000
 Treatment of Mr.G’s grandfather in a private clinic Rs.12,000
 Treatment of Mr.G’s mother (68 years and dependant) by family doctor Rs.8,000
 Treatment of Mr.G’s sister (dependant) in a nursing home Rs.3,000
 Treatment of Mr.G’s brother (independent) Rs.6,000
 Treatment of Mr.G’s father (75 years and dependant) abroad Rs.50,000
 Expenses of staying abroad of the patient Rs.30,000
 Limit specified by RBI Rs.75,000

Problem on shares allotted to employees under ESOP:

27. AB Co. Ltd allotted 1000 sweat equity shares to Mr.R in June 2024. The shares were allotted at
Rs.600 per share as against the fair market value of Rs.900 per share on the date of exercise of
option by Mr.R. The fair market value was computed in accordance with the method prescribed
under the Act.

i. What is the perquisite value of sweat equity shares allotted to Mr.R?

ii. In the case of subsequent sale of those shares by Mr.R, what would be the cost of acquisition of
those shares?

Problems on car facility:

28. X is provided with 2 cars to be used for official and personal work and the following information is
available from the companies’ records:
18 h.p. car 10 h.p. car
Cost of the car Rs.24,00,000 Rs.4,00,000
Running and maintenance Rs.1,30,000 Rs.36,000
Salary of driver Rs.2,40,000 Rs.1,20,000
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29. X has been provided with the benefit of a car by his employer. Compute the perquisite value
of the car for the assessment year 2025-26 in the following situations assuming X is a
specified employee.

a. X has been provided with a car (12 hp) owned by the employer, cost of the car is Rs.12,00,000.
The expenditure incurred by the company on maintenance of the car are – petrol Rs.90,000;
driver’s salary Rs.84,000 and maintenance Rs.10,000. The car can be used by X partly for official
and partly for private purposes.

b. Assume in situation (a) that the car is used only for private purposes.

c. A car (18 hp) is owned by the employer (cost of the car being Rs.25,00,000). X an employee, can
use it partly for official purposes and partly for private purposes. Expenses for private purposes
are, however, incurred by X.

d. Assume in situation (c) that the car can be used only for private purposes.

e. X owns a car (1400 cc). He uses it partly for official purposes and partly for private purposes.
During the previous year 24-25, he incurs a sum of Rs.50,000 on running and maintenance of
car. Besides, he has engaged a driver (salary Rs.84,000). The employer reimburses the entire
expenditure of Rs.1,34,000. Log book of the car is not maintained.

f. Assume in situation (e) that the log book of the car is maintained and 90% of the expenditure is
for official use and 10% for private use.

g. A car (1700 cc) is owned by the employer. All expenses (Rs.56,000) are incurred by the
employer. The employer maintains log book of the car. X, an employee, uses the car only for
official purposes. The employer gives a certificate that the car is used only for official purposes.