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TAXABILITY OF PERQUISITES PROVIDED BY EMPLOYERS .

Kishan Kumar 
on 12 February 2009

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TAXABILITY OF PERQUISITES PROVIDED BY EMPLOYERS WHO ARE NOT SUBJECT TO FRINGE BENEFIT TAX
 
 
INTRODUCTION
 
Since, Chapter XII-H relating to Fringe Benefit Tax, as provided in the Finance Act, 2005, is not applicable to the employer, being an individual or a Hindu undivided family or any fund or trust or institution eligible for exemption under clause (23C) of section 10 or registered under section 12AA, rule 3 is required to be amended so as to include
valuation of perquisite in case of benefits provided by such employers to its employees.
 
Accordingly, sub-rules 2, 6, 7 (ii), (iii), (iv), (v) and (vi) have been inserted to provide for such valuation.
 
                      Sub-rule 7(ix) has been inserted to provide for valuation of any other
benefit or amenity, etc. in residual cases relating to any employer. These sub-rules will
take effect from 1st April, 2008 and will, accordingly, apply in relation to A.Y.2008-09 and subsequent years.
 
 
The following perquisites provided by an employer, who is not liable to pay fringe benefit tax under Chapter-XIIH, shall be chargeable to tax in the hands of the employee under the head “Salaries”.
 
 Taxability of Motor Car – [Rule 3(2)(A)]
 

Owner of Car
Expenses met by
Purpose
Taxable value of perquisite.
1(a)Employer
Employer
Fully Official
Not a perquisite provided the documents specified in Rule 3(2)(B) are maintained
1(b)Employer
Employer
Fully private Use
 Aggregate of-
                 a)Actual expenditure on car
                 b) Remuneration to chauffeur
                 c)10% of the cost of car ( wear & tear)
Less:- Amount charged from employee
1(c)(i)Employer
Employer
Partly for Official and partly for personal use
Cubic Capacity of Car Engine upto 1.6 Litres
Rs.1200P.m +Rs.600P.m for Chauffeur
Cubic Capacity of Car Engine above 1.6 Litres
Rs.1600P.m+Rs.600P.m for Chauffeur
1(c)(ii)Employer
Employee
Partly for Official and partly for personal use
Cubic Capacity of Car Engine upto 1.6 Litres
Rs.400P.m.+Rs.600P.m for Chauffeur
 Cubic Capacity of Car Engine above 1.6 Litres
Rs.600P.m+Rs.600P.m for Chauffeur
2(i)Employee
Employer
Fully official use
Not a perquisite provided the documents specified in Rule 3(2)(B) are maintained
2(ii)Employee
Employer
Partly for Official and partly for personal use
Subject to Rule 3(2)B 
   Actual expenditure incurred
Less:-
Car cubic Capacity up to 1.6 Litres-value as per 1(c)(i)
Car cubic Capacity  above to 1.6 Litres-value as per 1(c)(i)
 
3(i) Employee owns other auto-motive but not car
Employer
Fully official use
Not a perquisite provided the documents specified in Rule 3(2)(B) are maintained
3(ii) Employee owns other auto-motive but not car
Employer
Partly for Official and partly for personal use
Subject to Rule 3(2)B 
              Actual expenditure incurred by employer
Less:-Rs.600P.m

 
 
Note:-
  1. Using cars from pool of cars owned or hired by Employer:
The employee is permitted to use any or all cars for both official and personal use;-
 

FOR ONE CAR
Valued as per per1(c) (i)
FOR MORE THAN ONE CAR
Valued as per 1(b) as if fully used for personal purpose

 
 
  1. Documents to be maintained for claiming `not taxable perquisite’ or higher deduction wherever applicable [Rule3 (2) B]:-
 
a)      Employer should maintain complete details of journey undertaken for official purpose, which includes date of journey, destination, mileage and amount of expenditure incurred thereon.
 
b)      Certificate of supervising authority of the Employee, wherever applicable, to the effect that the expenditure was incurred for wholly and exclusively for performance of official duties, should be provided.
 
 
 
 
 
 
 
 
 
TAXABILITY OF OTHER BENEFITS:
 

Rule
Nature of perquisite
Taxable Value of Perquisite
3(6)
Transportation of goods or passengers at free concessional rate provided by the employer engaged in that business.(other than railways/airlines)
     Value at which offered to public
Less;-Amount recovered from the employee
3(7)(ii)
Travelling,touring,accommodation and other expenses met by the employer other than specified in rule 2B
Amount incurred or value offered to public
Less:-Amount recovered from employee
3(7)(iii)
Free meals during office hours
Free meal in remote area or offshore installation area is not a taxable perquisite
Actual cost to the employer but not taxable up to Rs.50per meal or tea or snacks
Less;- Amount recovered from the employee
Tea or non-alcoholic beverages and snacks during working hours is not taxable.
3(7)(iv)
Value of any gift or voucher or token other than gifts made in cash or convertible into money on ceremonial occasion
Value of gift
In case the aggregate value of gift during the previous year is less than Rs.5000,then it is not taxable
3(7)(v)
Expenditure incurred on credit card or add on card including membership fees and annual fee
Actual expenditure to employer is taxable.
Less:-amount recovered from employee.
If it is incurred for official purpose and supported by necessary documents then it is not taxable.
3(7)(vi)
Expenditure on club other than health club or similar facilities provided uniformly to all employees.
Actual expenditure incurred by the employer
Less;-amount recovered from employee
If it is incurred for official purpose and supported by necessary documents then it is not taxable
Initial fee of corporate membership of a club is not taxable perquisite
3(7)(ix)
Any other benefit or amenities or service or right or privilege provided by the employer other than telephone or mobile phone.
Cost to the employer
Less: amount recovered from employee

Note;-member of household includes spouse(s), children, &their spouses, parents, servants and dependents.



Category Income Tax
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