Income tax presentation on perquisites and assessment of individuals.

1. Definition Of Perquisites
• “Perquisite” may be defined as any casual emolument or benefit
• attached to an office or position in addition to salary or wages. In
• essence, these are usually non-cash benefits given by an employer
• to employees in addition to cash salary or wages. However, they
• may include cases where the employer reimburses expenses or
• pays for obligations incurred by the employee. Perquisites are also
• referred to as fringe benefits.

2. Broadly, “perquisite” is defined in the section 17(2) of the
Income-tax Act as including:
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.
3) Any sum paid by employer in respect of an obligation,
which
was actually payable by the assessee.
4) Any sum paid by the employer for assurance on life of
the
employee or to effect a contract for an annuity.
5) Value of any other fringe benefit as may be prescribed.

3. EXEMPTED FROMTAX (FULLY EXEMPTED) Free medical facilities or
reimbursement of medical expenditure: exempted upto Rs 15000 p.a
¢ Free refreshment supplied
¢ Free meals given at remote area or offshore
¢ Free recreational facilities
¢ Provision for telephone including mobile phones
¢ Free education : should not exceed Rs 1000 per child
¢ Cost of refresher course
¢ Any rent free residential
¢ Good sold by employer to employee
¢ Free ration received by members
¢ Perquisite allowed by govt to employees posted abroad
¢ Rent free house given to officer of parliament

4. Conveyance facilities to judges
¢ Any amount contributed by employee towards pension
¢ Any amount contributed by employee towards pension
¢ Transfer of movable assets
¢ Accident insurance premium
¢ Interest free loan: does not exceed Rs 20,000 ¢
Perquisites and allowance paid by government to its employees
posted outside India.

5. IMPORTANT POINTS
• Employees covered under payment of gratuity act, 1972: applies
to the employees or workers covered under this act.
• ¢ Calculation of length of service/ service period: period
exceeding 6 moths is taken as a full year.
• ¢ How to calculate 15 days salary: (a) in case of monthly rated
employees: 15 days salary= monthly salary last drawn * 15 days -
-----------------------------------26 days
• ¢ (b) in case of piece rated employees: on the basis of avg of the
total wages/salary of a period of 3 months immediately preceding
his retirement wages for overtime period are to be ignored

6. Tax Free Medical Fecilities
• As per proviso to Section 17(2) exemption is available from income tax, on medical
facilities for the employee and his family. This exemption would now be available in
respect of
• (i) Medical facility provided in hospitals, clinics, etc. maintained by the employer;
• (ii) Reimbursement by the employer of expenditure incurred by the employee in
hospitals, dispensaries, etc. maintained by government, local authority, or in a
hospital approved under the central health scheme or a similar scheme of any state
government or private hospitals and nursing homes approved by the Chief CIT (for
some prescribed diseases);
• (iii) Group medical insurance obtained by the employer for his employees (including
members of their families) or reimbursement of insurance premium to the employees
who take such medical insurance; and

7. As per proviso to Section 17(2) exemption is available from income tax, on
medical facilities for the employee and his family. This exemption would now be
available in respect of
(i) Medical facility provided in hospitals, clinics, etc. maintained by the employer;
(ii) Reimbursement by the employer of expenditure incurred by the employee in
hospitals, dispensaries, etc. maintained by government, local authority, or in a
hospital approved under the central health scheme or a similar scheme of any
state government or private hospitals and nursing homes approved by the Chief
CIT (for some prescribed diseases);
(iii) Group medical insurance obtained by the employer for his employees
(including members of their families) or reimbursement of insurance premium to
the employees who take such medical insurance

8. The following perquisites are taxable in the
hands of all employees:
(i) Rent Free Accommodation
(ii) Any concession in the matter of rent in
respect of accommodation provided by
employer to employee
(iii) Discharge of monetary obligation of the
employee
(iv) Any sum payable by the employer whether
directly or through a fund to effect an
assurance on the life of the assesse
(v) Fringe benefits

9. Government
Other employer

10. Accommodation is unfurnished
•License fee is determined by government is
perquisites in the hand of employee.
Accommodation is furnished
•VFRFA= VURFA+10% of original cost of furniture

11. Accommodation is unfurnished
•Accommodation is owned by employer
•Accommodation is not owned by empoyer
Accommodation is furnished
•VRFA= VURFA + 10% of the original cost of furniture

12. Value of taxable perquisites= Actual amount of
expenditure met by employer
Examples are given below:
 Gas, Electricity bill paid
 Children education expenses paid
 Medical expenses paid

13. Value of taxable perquisites= Actual amount of
expenditure met by employer

14. FRINGE BENEFITS
Taxable perquisites in the hands of All employees

15. Interest Free Or Concessional Loans
Value of benefit resulting from loans made available to employee or any
member of his household by his employer or a person in this behalf in the
relevant previous year.
Value - Maximum outstanding monthly balance X SBI Lending rate (as reduced
by interest paid by him)
Exceptions to chargeability of the value of benefit:
1. where the amount of loan does not exceed Rs. 20,000
2. loan for treatment of diseases mentioned in Rule 3A.

16. Travelling, Touring, Accommodation etc.
A. 1. Not available uniformly to all
employees
2. Available uniformly to all
employees
1. Value at which such facilities are
offered by other agencies to the
public.
2. Amount actually incurred by the
employer
B. Household Member accompanying
an employee on an official tour
Amount incurred by employer in
respect of the member.
C. Official tour extended as a vacation Value limited to the part of expenses
incurred on the vacation
D. Any other case involving such facility Amount incurred by employer

17. Value of Free Food & Non-beverages
1. Tea or snacks during working hours NIL
2. Facility provide in a remote are or an
offshore installation
NIL
3. Facility provided
i. at office or business premises
ii. Through paid vouchers
NIL upto Rs. 50 per meal
4. Any other case Amount incurred by employer less
amount recovered

18. Expenses on Credit Cards
Expenses including membership fees and annual fees charged to credit
card paid or reimbursed by the employer , then the value of benefit will
be the amount paid or reimbursed by the employer.
Where such expenses are incurred wholly and exclusively for official
purposes, then value of benefit is NIL provided some conditions are
fulfilled.
Club membership and expenses incurred in a club
Same as above

19. Use of Movable Asset
Use of Laptops and computers
NIL
Movable assets, other than-
1. Laptops and computers
2. Assets already specified
1. 10% p.a of the actual cost
2. Rent or charge paid by the
employer

20. Transfer of any Movable Asset
ASSET TRANSFERRED VALUE OF BENEFIT
Computers and electronic items
Cost of asset reduced by 50% of cost for each
completed year, on the basis of RBM
Motor cars
Cost of asset reduced by 20% of cost for each
completed year, on the basis of RBM
Any other asset
Cost of asset reduced by 10% of cost for each
completed year, on the basis of
SLM

21. PERQUISITES TAXABLE IN THE
HANDS OF SPECIFIED
EMPLOYEES
Sometimes the employer provides the perquisites in the form of facility to the
employee. Such facility will be a perquisite only for specified employees
mentioned in section 17(2)(iii) like services of a sweeper, gardener, watchman or
personal attendant, use of motor car etc..

22. SPECIFIED EMPLOYEE
Under section 17(2)(iii), an employee shall be a specified employee, if he falls under any of
the following 3 categories:
(i) He is a director of a company;
(ii) He, i.e. the employee, has a substantial interest in the company. As per section 2(32),
person who has a substantial interest in the company, in relation to a company means
a person who is the beneficial owner of shares, not being shares entitled to a fixed
rate of dividend whether with or without a right to participate in profits, carrying not
less than 20% of the voting power.
(iii) His income under the head salaries(excluding non-monetary benefits/perquisites),
exceeds Rs 50,000. The following are to be deducted from salary for this purpose.
(a) entertainment allowance
(b) tax on employment

23. Valuation of motor car/other
vehicles[rule3(2)]
Where the motor car is
owned by the
employer
Where the motor car is
owned by the
employee
Where any other
vehicle is owned by
the employee

24. S.No Circumstances VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine does not exceed
1.6 litres
(small car/vehicle)
VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine exceed 1.6 litres
(large car/ vehicle)
1. Where the car is owned or hired by the
employer and the running and maintenance
expenses are met or reimbursed by the
employer:
(a) Is used wholly and exclusively in the
performance of his official duties;
(b) Is used exclusively for the private or
personal purpose of the employee or any
member of his household;
No value
Actual amount of
expenditure made by the
employer+10% p.a. on
original cost of motor
car/hire charges + driver’s
salary- any amount
charged from the
employee for such use
No value
Actual amount of
expenditure made by the
employer+10% p.a. on
original cost of motor
car/hire charges + driver’s
salary- any amount
charged from the
employee for such use

25. S.No Circumstances VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine does not exceed
1.6 litres
(small car/vehicle)
VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine exceed 1.6 litres
(large car/ vehicle)
(c) Is used partly in the performance of
official duties and partly for personal or
private purposes of his own or of his
household—
(i) The expenses on running and
maintenance are met or reimbursed by
the employer.
(ii) The expenses on running and
maintenance for such private or
use are fully met by the employee.
Rs 1800 p.m. + Rs 900 for
driver’s salary if any
Rs 600 p.m. + Rs 900 for
driver’s salary if any
Rs 2400 p.m. + Rs 900 for
driver’s salary if any
Rs 900 p.m. + Rs 900 for
driver’s salary if any

26. S.No Circumstances VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine does not exceed
1.6 litres
(small car/vehicle)
VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine exceed 1.6 litres
(large car/ vehicle)
2. Where the employee owns a motor car but
the actual running and maintenance
are met reimbursed to him by the employer
(a) Such reimbursement is for the use of the
vehicle wholly and exclusively for official
purposes
(b) Such reimbursement is for the use of
private or personal purposes of
employee or member of his household.
No value
Actual amount incurred
the employer including
driver’s salary- amount
charged from employee
for such use
No value
Actual amount incurred
the employer including
driver’s salary- amount
charged from employee
for such use

27. S.No Circumstances VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine does not exceed
1.6 litres
(small car/vehicle)
VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine exceed 1.6 litres
(large car/ vehicle)
(c) Such reimbursement is for the use of the
vehicle partly for official purposes and
for personal purposes of the employee or
any member of his household.
(d) Where the car is partly used for official
purposes and partly for personal purposes
but the expenses for personal use is borne
by the employee
Actual amount of
expenditure incurred by
the employer- Rs 1800
p.m.(including driver’s
salary of Rs 900 p.m. if
any)
Rs 600 p.m. + Rs 900 for
driver’s salary if any
Actual amount of
expenditure incurred by
the employer- Rs 2400
p.m.(including driver’s
salary of Rs 900 p.m. if
any)
Rs 900 p.m. + Rs 900 for
driver’s salary if any

28. S.No Circumstances VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine does not exceed
1.6 litres
(small car/vehicle)
VALUE OF TAXABLE
PERQUISITES
Where cubic capacity of
engine exceed 1.6 litres
(large car/ vehicle)
3. Where the employee owns any other auto-
motive conveyance but the actual running
and maintenance charges are met or
reimbursed to him by the employer-
(i) Such reimbursement is for the use of
vehicle wholly and exclusively for official
purposes
(ii) Such reimbursement is for the use of
vehicle partly for official purposes and
partly for personal or private purposes
the employee.
No value
actual amount of
expenditure incurred by
the employer-900 p.m.-
amount charged from the
employee
Not applicable

29. PROVISION BY THE
EMPLOYER OF SERVICES OF A
SWEEPER, A GARDENER, A
WATCHMAN OR PERSONAL
ATTENDANT
Value of taxable perquisites=the value shall be the actual
cost to the employee-any amount paid by the employee
for such services

30. VALUE OF BENEFIT TO THE
EMPLOYEE RESULTING FROM
THESUPPLY OF GAS, ELECTRIC
ENERGY OR WATER FOR
HOUSEHOLD CONSUMPTION
Circumstances Value of benefits
(a) Where such supply is made from resources owned
by the employer without purchasing from the outside
agency
It shall be the manufacturing cost per unit incurred by
the employer
(b) In any other case Amount paid on this account by the employer to the
agency supplying the gas, electric energy or water

31. FREE OR CONCESSIONAL
EDUCATION FACILITIES TO ANY
MEMBER OF EMPLOYEES’
HOUSEHOLD [RULE3(5)]

32. CIRCUMSTANCES VALUE OF BENEFIT
a) Where the educational institution is
itself maintained and owned by the
employer
The cost of education in a similar
institution in or near the locality .
However , if the educational facilities
are provided to the children of the
employee (any other member of the
household no covered here), the value
of this perquisite shall be nil if the cost of
such education does not exceed Rs
1000
b) Where free education facilities for
such members of employees’
household are allowed in any other
educational institution by reason of his
being in employment of that
employer
Actual amount of expenditure made by
the employer. However , if the
educational facilities are provided to the
children of the employee (any other
member of the household no covered
here), the value of this perquisite shall
be nil if the cost of such education does
not exceed Rs 1000

33. FREE OR CONCESSIONAL JOURNEY GIVEN TO
THE TRANSPORT EMPLOYEES AND THEIR
FAMILY MEMBERS[RULE 3(6)]

34. PARTICULARS VALUE OF PERQUISITES
Provisions of transport to the employee or to a
member of his household by the employer who is
engaged in the carriage of passengers or goods-
1. In the case of employee of an airline or the
railways
2. In the case of any other employee:
• If provided free of cost
• If provided at concessional rate
Nil
Value at which such benefit or amenity is offered
by such employer to the public
Reduce from the above value, the amount paid
by or recovered from the employee for such
benefit or amenity.

35. ASSESSMENT OF INDIVIDUALS
 An individual means natural person i.e. human
being.
 Individual includes:
1. male
2. Female
3. Minor child
4. Lunatic
5. An idiot

36. INCOMES OF AN INDIVIDUAL WHICH ARE TAXABLE
 Income earned by an individual himself- in his individual
capacity.
 Remuneration and interest received by the partner from
a firm or a LLP.
 Income received as a member of an association of
persons, etc.
 Income of other persons included in the income of the
individual.
 Incomes from impartible estate of an individual.

37. COMPUTATION OF TOTAL INCOME AND TAX LIABILITY
 STEP 1: Compute the income of an individual under 5
heads
 STEP 2: Add income of any other person includible
 STEP3: Set off losses if permissible
 STEP 4: Carry forward and set off the losses of past
years
 STEP 5:Give deductions u/s 80C TO 80U from Gross
Total Income
 STEP6 :Now Total income is rounded off to the nearest

38.  STEP7:Compute tax on such Total Income at the
prescribed rate of tax.
 STEP8:Allow rebate of maximum Rs 5000 in case of
resident individual having total income upto Rs
5,00,000.
 STEP9: Add surcharge @ 15% if the total income
exceeds Rs 1 crore.
 STEP10:Add education cess@ 2% and SHEC @ 1%
on the tax.
 STEP 11:Allow relief under section 89, if any
 STEP 12: Deduct TDS, advance tax paid for the
relevant assessment year. The balance is the net tax
payable which will be rounded to nearest 10 rupees .

39. PARTICULARS RATE OF TAX
A. Winning from lotteries, crossword puzzles or races including horse races 30%
B. Short term capital gain on equity shares in a company or units of an equity
oriented fund
15%
C. Long term gains 20%
D. The balance of total income in case of:
1) An individual (man or woman) resident in India who is age of 80 years or more
at any time during previous year:
Upto Rs 5,00,000
Rs 5,00,000 to Rs 10,00,000
Above Rs 10,00,000
2) An individual (man or woman) resident in India who is age of 60 years or more
at any time during previous year:
Upto Rs 2,00,010
Rs 2,00,010 to Rs 5,00,000
Rs 5,00,010 to Rs 10,00,000
Above 10,00,000
3) An individual, (other than mentioned above)HUF, AOP/BOI
Upto Rs 2,50,000
Rs 2,50,010 to Rs 5,00,000
Rs 5,00,010 to Rs 10,00,000
Above 10,00,000
Nil
20%
30%
Nil
10%
20%
30%
Nil
10%
20%
30%

40. ALTERNATE MINIMUM TAX (AMT)
Where the regular income tax payable for a
previous year by a person is less than the
alternate minimum tax payable for such
previous year, the adjusted total income shall be
deemed to be the total income of such person
and he shall be liable to pay income- tax on
such total income at the rate of 18.5% [Section
115JC(1)]

41. AN ILLUSTRATION

42. Mr. Sameer Raichand , who is an Indian Citizen and is a resident for income
tax purposes submits the following information for assessment year 2017 to
2018.
Rs
a) Gross Salary
2,50,000
b) Profession tax paid
2,000
c) Own contribution to RPF
10,000
d) Employer’s contribution to provident fund 10,000
e) Dividend from Indian company
2,000
f) Income on deposits with a company (gross) 49,000
g) Long-term capital gain from house property 60,000

43. COMPUTATION OF TOTAL INOME OF SAMEER
RAICHAND FOR THE ASSESSMENT YEAR 2017-
2018 Rs Rs
1) Income from Salary
Gross Salary 2,50,000
Less: Deduction on account of
profession tax (2000) 2,48,000
2) Income from Capital Gains
Long term capital gains 60,000
Short term capital gains 40,000 1,00,000
3) Income from other sources
Dividend from other company Exempt
Interest on deposit with company 49,000 49,000
GROSS TOTAL INCOME 3,97,000
1.

44. GROSS TOTAL INCOME 3,97,000
Less: Deduction u/s 80C 10,000
TOTAL INCOME 3,87000
Computation of tax
LTCG- Rs60,000@ 20% 12000
STCG u/s111A-Rs40,000@15% 6,000
Tax on balance Rs2,87,000 3,700
21,700
Less: Rebate u/s 87A 5,000
16,700
Add: Education cess and SHEC @3% 501
17,201
Tax rounded off 17200

45. MADE BY
 MALLIKA HALDAR
 LAXMI CHAUHAN
 MADHAVI BANSAL
 MAHIMA UPADHYAY
 KRITI VARSHNEY