Taxable & Non-Taxable Perquisites A.Y.2016-17

Perquisites are benefits earned by employees of a company along with their normally received wages or salaries. They are also called as perks. It is like a gratuity or incidental payment for which the employee has the sole right. These are fringe benefits paid for a genuine reason. They can be either given by the employer directly or indirectly. Before discussing about perquisites, let us see what salary includes.

Under section 17(1) of IT Act, it consists of

Annuity/Gratuity/Wages/Advance salary/Commission/fees/profits with respect to salary, etc

The following are the types of perquisites

Taxable Perquisites;

Non-taxable Perquisites

Perquisites taxable but are taxable only in the hands of particular employees

Taxation of Perquisites

Perquisite is a gain or profit incidentally made from employment in addition to regular salary or wages. Following perquisites shall be taxable.

1) Value of rent free accommodation provided to the assesses by his employer,
2) Value of any accommodation provided to the assesses by his employer, at a concessional rent;

Note: An accommodation shall be deemed to have provided at a ‘concessional rent’ when the value of the furnished/ unfurnished accommodation determined as per rule 3 (before deducting amount of rent actually paid by the employee) exceeds the amount of rent recoverable from, or payable by, the employee and any charges paid or payable for the furniture and fixtures by the employee. [Sec. 17 (2)]

3) Value of any amenity or benefit granted free of cost or at a concessional rate to the following categories of employees:

A director in the employer Company;

An employee being the beneficial owner of at least 20% of the ordinary shares in the employer company; and

Any other employee whose income under the head ‘Salaries’ exclusive of all non-monetary benefits or amenities exceeds Rs. 50, 000.

The perquisites taxable under this category are:

Provision of free or concessional educational facilities, Reimbursement of medical expenditure,

Expenditure on foreign travel and stay during medical treatment, Supply of gas, electricity and water, Sale of an asset to the employee at concessional price (including sale o shares in the employer company).

4) Any sum paid by the employer in shares in the respect of any obligation which but for such payment, would have been payable by the assesses.

5) Any sum payable by the employer whether directly or through fund to effect an assurance on the life of the assesses or to effect a contract on an annuity.

6) Value of any sweat equity shares (ESOP) allotted (on the after 1.4.2009) by the employer on former employer, free of cost or at concessional rate to the assesses.

7) Amount contributed to an approved superannuation fund by the employer in respect of the assessee-employee, in excess of Rs. 1, 00, 000.

8) Value of any other benefit or amenity as may be prescribed, such as free meals, club facility, credit card, gifts, interest free or concessional loans, etc.

Perquisite Not Taxable: The following shall, however, not constitute as perquisite:

1) Value of medical treatment provided to an employee or his family member in a hospital maintained by his employer;

2) Reimbursement of expenditure incurred on medical treatment of and employee or his family member in a Government approved hospital (like CHS or CGHS);

3) Reimbursement of expenditure incurred by the employee in a hospital approved by the Chief Commissioner in connection with the medical treatment of the employee or any member of his family. This concession will be admissible for treatment of prescribed diseases or ailments. The employee is required to attach with his return of income –

A certificate from the hospital specifying the disease or ailment for which medical treatment was required, and 

The receipt for the amount paid to the hospital.

4) Premium paid by an employer to keep in effect an insurance on the health of a employee under a scheme approved by  the Central Authority for the purpose of section 36(1) (ib);

5) Medical insurance premium paid by an employer for the health of an employee or his family member under a scheme approved by the Central Authority u/s 80D (i.e. MEDICLAIM);

6) Reimbursement of expenditure incurred on medical treatment of an employee or his family member [other than referred to in clause (i), (ii) and (iii) above], not exceeding Rs. 15, 000 in a previous year;

7) Expenditure incurred by the employer or reimbursement of expenditure incurred, on medical treatment of an employee or his family member outside India, including expenditure on travel and stay aboard of the employee or family member, as the case may be, and one attended subject to the conditions and limits prescribed by the Board.

9) The expenditure on medical treatment and stay abroad shall be excluded from perquisites only to the extent permitted by the Reserve Bank of India.

10) The expenditure on foreign travel shall not constitute perquisite in case the gross total income not including the said expenditure, of the employee does not exceed Rs. 2, 00, 000. [Section 17(2) Proviso]

Note: ‘Family’ for his purpose means – The spouse and children of the individual (employee), and The parents brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual. Perquisites, however, are exempted for the employees whose salary does not exceed one lakh and for all others, paying Income tax is mandatory. The government employees can enjoy travel concession even outside the country.

Wealth Tax

Wealth tax is a direct tax, which is charged on the net wealth of the assessee. It is a tax on the benefits derived from ownership of property. The tax is to be paid year after year on the same property on its market value, whether or not such property yields any income. Wealth tax, in India, is levied under Wealth-tax Act, 1957.

Under the Act, the tax is charged in respect of the wealth held during the assessment year. Chargeability to tax also depends upon the residential status of the assessee same as the residential status for the purpose of the Income Tax Act.

If the Net Wealth exceeds Rs 30 Lakhs on the Valuation Date i.e. last Date of Previous Year. 

The assets chargeable to wealth tax are :-

• Guest house, residential house, commercial building
• Motor car
• Jewellery, bullion, utensils of gold, silver etc
• Yachts, boats and aircrafts
• Urban land
• Cash in hand(in excess of 50,000), only for Individual & HUF

The following will not be included in Assets :-

• Any of the above if held as Stock in trade.
• A house held for business or profession.
• Any property in nature of commercial complex.
• A house let out for more than 300 days in a year.
• Gold deposit bond.
• A residential house allotted by a Company to an employee, or an Officer, or a Whole Time Director ( Gross salary i.e. excluding perquisites and before Standard Deduction of such Employee, Officer, Director should be less than Rs. 5,00,000).

The Assets exempt from Wealth tax are :-

• Property held under a trust.
• Interest of the assessee in the coparcenary property of a HUF of which he is a member.
• Residential building of a former ruler.
• Assets belonging to Indian repatriates.
• One house or a part of house or a plot of land not exceeding 500sq.mts,for individual & HUF assessee

 The levy of wealth tax under the Wealth-tax Act, 1957  abolished with effect from the 1st April, 2016 and raised the surcharge by 2% to 12% for assessees having income more than Rs.1 crore in a year. This is applicable in relation to the assessment year 2016-17 and subsequent assessment years .