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Perquisites Under Salaries: A Tabular Overview for Taxpayers

Perquisites under salaries refer to the non-cash benefits or amenities provided by employers in addition to the cash salary. These benefits often carry economic value, and their taxation plays a critical role in determining an individual's overall tax liability. This article provides an easy-to-understand overview of perquisites under salaries, presented in a tabular form. It also includes frequently asked questions to help you plan and optimize your tax benefits.

Overview of Perquisites Under Salaries

Perquisites include a range of benefits such as employer‑provided accommodation, preferential loans, company cars, travel allowances, and more. Under both the Income Tax Act, 1961, and the proposed Income Tax Bill, 2025, these benefits are generally taxable. However, the new bill offers a modernized framework with refined valuation methods and updated thresholds.

The following table outlines key perquisite categories, their descriptions, methods of valuation, and tax treatment under salary income.

Tabular Comparison of Key Perquisites

Perquisite Category	Description	Valuation Method	Tax Treatment	Exceptions/Exemptions
Employer-Provided Accommodation	Housing provided by the employer, including rent-free or concessional-rate accommodations.	Fair rent is determined by municipal valuation or a fixed percentage of salary; taxable value is the excess over actual rent paid by the employee.	Taxed as a perquisite. The value (or excess of fair rent over rent paid) is added to salary income.	Certain thresholds or exemptions may apply for employees in remote areas or for specified categories.
Preferential/Interest-Free Loans	Loans provided at rates lower than market rate or interest-free.	Taxable value is computed as the difference between the market interest rate and the rate actually charged.	The benefit, i.e., the interest difference, is taxable as income.	Some concessions are provided for loans to acquire housing or under defined employee benefit schemes.
Company Vehicles	Vehicles provided by the employer for personal use.	Valuation based on engine capacity and prescribed rules; generally computed using fixed percentages of salary.	Taxed as a perquisite, based on the deemed value of the vehicle provided.	ITC and specific exemptions may be available if the vehicle is used for both business and further supply by the employer, subject to rules.
Travel Benefits (Leave and Home Travel Concessions)	Benefits provided to employees for travel for personal reasons as part of the salary package.	Typically assessed based on the cost incurred by the employer, with specific formulae determining the taxable portion.	Taxable, with the value of benefits added to salary income.	No general exemption; usually, these remain fully taxable unless specifically mandated by law.
Food & Beverage Allowance	Allowance or benefit for food, dining, or catering services provided by the employer.	Valuation is based on actual expenditure or a standard benefit ratio fixed by notifications.	Generally taxable as part of the perquisites, unless covered by a specific exemption.	Exemptions may exist if the services are provided due to statutory requirement or for welfare purposes.
Other Allowances/Fringe Benefits	Additional benefits such as club memberships, gym fees, or wellness programs.	Determined as per the actual cost or a standardized formula provided in the tax rules.	Taxed as a perquisite and included in total salary income.	Some benefits may be exempt if provided for employee welfare under mandated conditions.

Implications for Taxpayers

Understanding the taxation of perquisites is crucial for optimizing your tax liability. Here are some key points to consider:

• Accurate Valuation: Ensure that your employer uses the prescribed valuation methods to determine the taxable value of perquisites.
• Documentation: Maintain records of any benefits received, including lease agreements, receipts, or any other supporting documents.
• Salary Structuring: Some employers may structure compensation packages to maximize tax benefits, so be aware of how different perquisites affect your taxable income.
• Review Exemptions: Stay updated on any specific exemptions or thresholds announced in government notifications, particularly under the upcoming Income Tax Bill, 2025.

FAQs on Perquisites Under Salaries

What are perquisites under salaries?

Perquisites are non-cash benefits provided by an employer in addition to the cash salary. They include employer-provided accommodation, preferential loans, company vehicles, travel benefits, and other fringe benefits.

How is employer-provided accommodation valued for tax purposes?

The value is typically computed based on the fair rent using municipal valuation or a fixed percentage of the employee’s salary. Any excess of the fair rent over the actual rent paid by the employee is taxable.

Are preferential loans taxable?

Yes, the benefit derived from preferential or interest-free loans is taxable. The taxable value is determined by the difference between the market interest rate and the rate at which the loan was provided.

How are company vehicles taxed as perquisites?

The taxable value of a company vehicle is calculated based on factors like engine capacity and is determined by fixed rules. This value is then added to the employee’s salary income.

Can travel benefits be claimed as an exemption?

Generally, travel benefits such as leave travel concessions are taxable as perquisites. There are few exemptions unless provided under specific government conditions.

Is there any tax relief on food and beverage allowances?

Food and beverage allowances are typically taxable, though some exemptions may apply if the service is provided under statutory or mandatory welfare schemes.

Do I need to report perquisites separately in my tax return?

Yes, perquisites form part of your gross salary and must be reported in your income tax return. Your employer usually provides a breakdown on your Form 16.

How does the new Income Tax Bill, 2025 change perquisites?

The new bill expands the definition of perquisites to include modern benefits such as equity incentives while providing clearer rules and exemptions compared to the older framework under the Income Tax Act, 1961.

What should I do if I believe a perquisite has been overvalued?

Consult with your employer’s finance department and, if necessary, a tax professional to verify the valuation. Correct valuation can help minimize tax liability.

Where can I find more information about perquisites?

Official government websites, reputable tax advisory blogs, and consultation with professional tax advisors are recommended sources for detailed guidance.

Conclusion

The taxation of perquisites under salaries plays a crucial role in determining your overall tax liability. While both the Income Tax Act, 1961 and the proposed Income Tax Bill, 2025 treat these benefits as part of your taxable income, the new bill seeks to modernize and clarify the process with updated valuation methods and exemptions. By understanding these provisions and keeping detailed records, you can plan your finances effectively and potentially minimize your tax burden. Stay informed about any future notifications regarding perquisites to ensure that you are always in compliance with the latest tax rules.