Section 10(10CC) Benefit for Employee
This query is : Resolved
05 April 2021
I have a non-monetary perquisite (Gifts, vouchers etc.) from my employer amounting to Rs. 14,075 and my employer has paid tax on this amounting to Rs. 4,390/- in FY 21. Should Rs. 14,057/- be included in Value of Perquisite and Rs. 4,390/- under Less : Allowances to the extent exempt u/s 10 - Section 10(10CC)? If the answer is yes, I still end up paying taxes on Rs. (14,075 minus 4,390) = 9,685/- and I get almost no benefit by the tax paid by employer. Am I missing something? I am looking for an answer for tax filing under Old Tax Regime. Please help/advise.
11 July 2024
Under the Income Tax Act, non-monetary perquisites such as gifts and vouchers provided by an employer are taxable in the hands of employees. The taxability of such perquisites is governed by Section 17(2) of the Income Tax Act, 1961.
Here’s how the tax treatment typically works for non-monetary perquisites:
1. **Value of Perquisite**: The value of the non-monetary perquisite (in your case, Rs. 14,075) needs to be included in your total income under the head "Salaries".
2. **Tax Paid by Employer**: When an employer pays tax on behalf of an employee for non-monetary perquisites, such tax paid by the employer (Rs. 4,390 in your case) is treated as an allowance to the extent it is exempt under Section 10(10CC) of the Income Tax Act.
3. **Taxable Amount for Employee**: For tax purposes, the taxable amount for you as an employee is the value of the perquisite minus the exempt portion (allowance to the extent exempt u/s 10(10CC)).
- Value of Perquisite: Rs. 14,075
- Less: Allowance exempt u/s 10(10CC): Rs. 4,390
- Taxable Amount: Rs. 14,075 - Rs. 4,390 = Rs. 9,685
4. **Tax Treatment**: You will be required to include Rs. 9,685 in your total income from salaries. This amount will be subject to tax as per your applicable tax slab rates.
5. **Benefits and Considerations**:
- While the employer has paid tax on your behalf, the benefit to you is that only the net amount after the exempt allowance (Rs. 9,685) is taxable, not the full value of the perquisite.
- The tax paid by the employer helps in reducing your tax liability to the extent of the exempt allowance.
6. **Old Tax Regime vs. New Tax Regime**: In the old tax regime, you can claim deductions and exemptions as applicable, which may help in reducing your overall tax liability. Under the new tax regime, you have the option to apply lower tax rates without deductions and exemptions.
In conclusion, the computation you mentioned (including Rs. 14,075 in the value of perquisite and deducting Rs. 4,390 under exempt allowance) is correct for tax filing under the old tax regime. This approach ensures that you are taxed only on the net taxable amount after considering the exempt allowance paid by your employer.
Here’s how the tax treatment typically works for non-monetary perquisites:
1. **Value of Perquisite**: The value of the non-monetary perquisite (in your case, Rs. 14,075) needs to be included in your total income under the head "Salaries".
2. **Tax Paid by Employer**: When an employer pays tax on behalf of an employee for non-monetary perquisites, such tax paid by the employer (Rs. 4,390 in your case) is treated as an allowance to the extent it is exempt under Section 10(10CC) of the Income Tax Act.
3. **Taxable Amount for Employee**: For tax purposes, the taxable amount for you as an employee is the value of the perquisite minus the exempt portion (allowance to the extent exempt u/s 10(10CC)).
- Value of Perquisite: Rs. 14,075
- Less: Allowance exempt u/s 10(10CC): Rs. 4,390
- Taxable Amount: Rs. 14,075 - Rs. 4,390 = Rs. 9,685
4. **Tax Treatment**: You will be required to include Rs. 9,685 in your total income from salaries. This amount will be subject to tax as per your applicable tax slab rates.
5. **Benefits and Considerations**:
- While the employer has paid tax on your behalf, the benefit to you is that only the net amount after the exempt allowance (Rs. 9,685) is taxable, not the full value of the perquisite.
- The tax paid by the employer helps in reducing your tax liability to the extent of the exempt allowance.
6. **Old Tax Regime vs. New Tax Regime**: In the old tax regime, you can claim deductions and exemptions as applicable, which may help in reducing your overall tax liability. Under the new tax regime, you have the option to apply lower tax rates without deductions and exemptions.
In conclusion, the computation you mentioned (including Rs. 14,075 in the value of perquisite and deducting Rs. 4,390 under exempt allowance) is correct for tax filing under the old tax regime. This approach ensures that you are taxed only on the net taxable amount after considering the exempt allowance paid by your employer.
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