Perquisites exempted from Tax and Taxable Perquisites

[ManasaRP]

Hi,

What falls under Perquisites exempted from Tax for all Employees? and What falls under Taxable in case of Specified Employees?

[Bhuvana_Anand]

Hi Manasa,

Tax-free Perquisites for all employees will be the value of :

• any expenditure incurred by the employer, for providing training to the employees or by way of payment of fees of refresher courses attended by the employees.
• expenses on the telephone, including a mobile phone, actually incurred on behalf of the employee by the employer.
• employer’s contribution to the superannuation fund of the employee or provided such contribution does not exceed ₹1,50,000 per employee per year.
• (as per the Amendment made by the Finance Act, 2020 - the amount or the aggregate of amounts of any contribution made to the account of the assessee by the employer: (i) in a recognized provident fund; (ii) in the scheme referred under Section 80CCD(1), (iii) in an approved superannuation fund, to the extent it exceeds ₹7,50,000 in a previous year;
• premium paid by the employer on an accident policy taken out by it in respect of the employee would not be a perquisite.
• the amount given by the employer of assessee to the assessee’s child as scholarship (exempted under sec 10(16).
• loans to employees - the value of benefit to the assessee resulting from the provision of interest-free or concessional loan shall be nil where the loan value is not exceeding in the aggregate ₹20,000; loans made available for medical treatment in respect of diseases specified in rule 3A of the Income-tax Rules. However, the exemption so provided shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.
• food and beverages (i) free food and non-alcoholic beverages provided by the employer to his employees during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints. Provided the value of such meal is up to ₹50 per meal, (ii) any tea or snacks provided during working hours, (iii) Free food and non-alcoholic beverages during working hours provided in a remote area or on an offshore installation.
• any medical treatment provided to an employee or any member of his family in a hospital, dispensary, or nursing home maintained by the employer shall be a tax-free perquisite.
• any recreational facility provided to a group of employees (not being restricted to a select few employees) by the employer is not taxable.
• use of health clubs, sports, and similar facilities provided uniformly to all employees by the employer.
• perquisites provided by the Government to its employees, who are citizens of India for rendering services outside India, are not taxable.
• accommodation provided by the employer shall be a tax-free perquisite if the accommodation is provided to an employee working at a mining site or an onshore oil exploration site or a project execution site, or a dam site or a power generation site or an offshore site which being of a temporary nature and having plinth area not exceeding 800 square feet, is located not less than eight kilometres away from the local limits of any municipality or a cantonment board; or is located in a remote area.
• rent-free official residence and conveyance facilities provided to a Judge of the Supreme Court/High Court is not a taxable perquisite.
• rent-free furnished residence (including maintenance thereof) provided to an officer of the Parliament, a Union Minister or Leader of Opposition in Parliament, is not a taxable perquisite.
• where the educational institution itself is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his being in the employment of that employer, there shall be no perquisite value if the cost of such education or the value of such benefit per child does not exceed ₹1,000 p.m.
• use by the employee or any member of his household of laptops and computers belonging to the employer or hired by him.
• Leave Travel Concession.
• Tax paid by the employer on nonmonetary perquisites of the employee shall be exempt in the hands of the employee. [Section 10(10CC)]

Perquisites which are taxable in the hands of all categories of employees

• Rent free accommodation (furnished/unfurnished provided by the employer to the employee.
• Any concession in the matter of rent in respect of the accommodation provided or granted by the employer to the employee.
• Any sum paid by the employer in discharging the monetary obligation of the employee which otherwise would have been payable by the employee e.g., the school fees of the children of the employee paid by the employer or the Income-tax of the employee paid by the employer.
• Any sum payable by the employer whether directly or through a fund (other than recognized provident fund (RPF), Approved Superannuation Fund or Deposit Linked Insurance Fund) to effect an assurance on the life of the assessee or to effect a contract for an annuity.
• The value of any other fringe benefit or amenity as may be prescribed.

Perquisites which are taxable for Specified Employees

• All monetary obligations of the employee discharged by the employer are perquisites that are taxable in the hands of all employees. But sometimes the employer, instead of making the payment in respect of such monetary obligations or reimbursing such amount to the employee, provides the perquisite in the form of a facility to the employee. Such facility will be a prerequisite only for specified employees mentioned in section 17(2)(iii).
• Any benefit/amenity in the form of a facility (other than rent-free accommodation, concession in the matter of rent or fringe benefits or amenities as may be prescribed) provided by the employer, which is not tax-free, shall be taxable only in the hands of specified employees.
• e.g., services of a sweeper, gardener, security guard or personal attendant, free or concessional use of gas, electric energy, and water for household consumption, free or concessional educational facilities, use of motor car, personal or private journey provided free of cost or at concessional rate to an employee or member of his household, the value of any other benefit or amenity, service, right or privilege provided by the employer.
• If the above perquisites are provided in the form of money whether, by way of reimbursement of expenses incurred by the employee for such facilities or by way of payment on behalf of the employee, these perquisites shall be taxable in case of all employees.

Regards,
Bhuvana Anand