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All-in-one HR platform · v2.0
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All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
Benefits in kind given to an employee, such as a company car, rent-free accommodation, a concessional loan or stock options, which are taxed as salary under Section 17(2) of the Income-tax Act. Their taxable value is worked out under Rule 3, and the employer reports them and deducts tax on them through payroll.
Perquisites need attention whenever the company provides something other than cash: a company car, rent-free accommodation, an interest-free loan or a club membership. Payroll values each perquisite under the Income-tax rules and adds it to taxable salary for TDS.
Example: an employee takes a ₹5 lakh interest-free loan from the employer. The taxable perquisite is worked out at the notified benchmark rate on the outstanding balance, less any interest the employee actually pays, and added to salary for each month the loan is outstanding.
The usual mistake is leaving perquisites out of monthly TDS and adding them only at year-end, which produces a large deduction in March. Valuation rules are revised from time to time, so check the current Rule 3 provisions.
Under Rule 3 of the Income-tax Rules, which sets valuation methods for items such as company accommodation, cars, interest-free loans and ESOPs. The valued amount is added to taxable salary.
In Form 12BA, which lists each perquisite and its value, and in the salary figures in Form 16. Employees use these when filing their returns.
Equipment such as computers provided for work use is generally not taxed as a perquisite. Gifts, club memberships and personal use of assets may be, depending on the rule for each item.
Yes. The new regime removes many exemptions and deductions, but taxable perquisites remain part of salary income under either regime.
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