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New Perquisite Valucation Rules


o 15% of salary.
if accommodation is owned by employer if accommodation is owned by employer

• For government employees, the value fixed as per central /state government rules

.• For other employees, the valuation will depend on the population of the city where accommodation is provided and it is:

o 7.5% of salary where population upto 10 lacs.
o 10% of salary where population exceeds 10lacs but upto 25 lacs.
o 15% of salary where population exceeds 25lacs.

Owned by employee       Expense met by employer       actual exp (-) 1800  actual exp (-) 2400        Chaufer Provided        (+) 900    (+) 900     


Rule 3(3): Services of sweeper, gardener, watchman or personal attendant
• Salary paid by employer. Less amount actually paid by employee

Rule 3(4): Supply of gas, electric energy or water for household consumption
• Actual amount paid by employer Less amount actually paid by employee.
• If such supply is made from resourced owned by employer, then actual manufacturing cost per unit Less amount actually paid by employee.

Rule 3(5): Free / concessional educational facility
• Actual expenditure incurred by employer Less amount actually paid by employee.
• Where educational institution is owned / maintained by employer, then cost of such education in similar institute. However if this cost is upto Rs. 1000 per child per month, then perquisite value will be taken as NIL.

Rule 3(6): Personal / private journey
• If employer is engaged in travel or transport business and such facility is offered to employee or family member, the value of perquisite will be value of such benefit , as offered to public Less amount actually paid by employee.
• This rule will not apply to employees of an airline or railways.

Rule 3(7)(i): Interest free / concessional loan Any loan given free of interest or concessional interest shall be a taxable perquisite and calculated as follows:
• Interest calculated at the rate charged by State Bank of India as on 1 day of previous year on loan for the same purpose. This is to be calculated on maximum outstanding monthly balance.
• Less actual interest paid by employee. Exceptions
• Loan upto Rs. 20,000.
• Loan for medical purposes for prescribed diseases.

Rule 3(7)(ii): Travelling expenses on holidays
• Actual amount paid/reimbursed towards travelling expenses, including accommodation charges for any holiday availed by employee or family members.
• Where such facility is maintained by the employer, and is not available uniformly to all employees, the value of benefit shall be value at which such facilities are offered by other agencies to the public.
• Where the employee is on official tour and the expenses are incurred in respect of any member of his household accompanying him, the amount of expenditure so incurred shall also be a fringe benefit or amenity:
• Where any official tour is extended as a vacation, the value of such fringe benefit shall be limited to the expenses incurred in relation to such extended period of stay or vacation.
• The perquisite value is to be reduced by amount actually paid by employee. Exception
• Leave travel concession as per Rule 2B.

Rule 3(7)(iii): Free food / meal vouchers
• Amount of expenditure towards value of free food and non-alcoholic beverages provided by the employer to an employee as reduced by any amount paid by employee. Exception
• Free food and non-alcoholic beverages provided by such employer during working hours at work place upto Rs. 50 /- per meal.
• Paid vouchers which are not transferable and usable only at eating joints, upto Rs. 50/- per meal
• Tea or snacks provided during working hours.
• Free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.

Rule 3(7)(iv): Free Gift
• Amount of any gift, or voucher, or token in lieu of which such gift may be received by the employer by member of his household on ceremonial occasions or otherwise from the employer. Exception
• Gift up to Rs. 5000/- in aggregate during previous year.

Rule 3(7)(v): Credit Card expenses
• The amount charged to credit card used by the employee or family member, provided by the employer, or otherwise, paid for or reimbursed by such employer.
• This will include membership fees and annual fees. Exceptions
• Where expenses are incurred wholly and exclusively for official purposes and the following conditions are fulfilled:
(a) complete details in respect of such expenditure are maintained by the employer which may, inter alia, include the date of expenditure and the nature of expenditure;
(b) the employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.

Rule 3(7)(vi): Club membership
• Actual amount of expenditure paid / reimbursed to employee towards (including the amount of annual or periodical fee) amount spent in a club by him or family member
• Any amount recovered from employee will be reduced from such value. Exceptions
• where the employer has obtained corporate membership of the club and the facility is enjoyed by the employee or family member , the value of perquisite shall not include the initial fee paid for acquiring such corporate membership.
• if such  expenditure is incurred wholly and exclusively for business purposes and the following conditions are fulfilled:
(a) complete details in respect of such expenditure are maintained by the employer which may inter alia, include the date of expenditure, the nature of expenditure and its business expediency;
(b) the employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.
• Use of health club, sports and similar facilities provided uniformly to all employees by the employer.

Rule 3(7)(vii): Use of movable asset
• For use by the employee or family member of any movable asset the value of perquisite will be
o 10% per annum of the actual cost of such asset ,if the asset is owned by employer
o or the amount of rent or charge paid or payable by the employer,
• Any amount recovered from employee will be reduced from such value Exceptions
• Use of laptops and computers

Rule 3(7)(viii): Transfer of movable asset
• When any movable asset owned by employer is directly / indirectly transferred to employee or family member the value of benefit will be calculated as follows :
Actual Cost Less Depreciation Less amount actually paid by employee.
• Depreciation will be calculated.
@ 50% on reducing balance for computers and electronic items.
@ 20% on reducing balance for motor car.
@ 10% on cost for other assets.

Rule 3(7)(ix): Value of any other benefit
• The value of any other benefit or amenity, service, right or privilege provided by the employer shall be determined on the basis of cost to the employer under an arm's length transaction Exceptions
• Expenses on telephones including a mobile phone actually incurred on behalf of the employee by the employer.

Conclusion The new rules are more or less similar to earlier provisions (except motor car) applicable prior to introduction of FBT. Employers now need to value the perquisites, re-work tax liability and recover the same by March 2010.     




Category Income Tax, Other Articles by - CA Pramod Jain 



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