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Taxation of perks

Basavaraju KJ (Article Trainee) (43 Points)

24 October 2012

Hi All,

I've a question with related to taxation of perks.

Q: Company has policy of giving Rs. 3000/- (included in the salary) in the month of birth of employee as BIRTHDAY GIFT. Is it need to be taken as perks & taxed in the hands of employee ?

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14 Replies

Saket Sinha (Student) (129 Points)
Replied 24 October 2012

Any cash benefit given by employer to his employees is not a perk(perquisite) it is always an allowance and taxable in the hands of employees.

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(Guest)

Originally posted by : Saket Sinha
	Any cash benefit given by employer to his employees is not a perk(perquisite) it is always an allowance and taxable in the hands of employees.

Mr. Saket,

I agree with you but with small correction.

Sub-rule 7(iv) of Rule 3 says what you have said, followed by condition that if such perquisite value is below Rs. 5,000/-, it is to be taken as nil.

So, in the instant case, as the amount is below Rs. 5000/- it is not taxable.

Am I right or am I right???

1 Like

Saket Sinha (Student) (129 Points)
Replied 24 October 2012

Mr Sai Tharun Bopanna u have to agree without any correction that any gift made in cash whether below Rs 5000 or above doesnt come within the purview of perquisites.

It is the gift or vocher which has worth less than Rs 5000 will be exempted.

Varshit Shah (Self Employed) (676 Points)
Replied 24 October 2012

I agree with Sai. Gifts includes gift recd in cash.

" The value of any gift, or voucher, or token in lieu of which such gift may be received by the employee or by member of his household on ceremonial occasions or otherwise from the employer shall be determined as the sum equal to the amount of such gift:

Provided that where the value of such gift, voucher or token, as the case may be, is below five thousand rupees in the aggregate during the previous year, the value of perquisite shall be taken as "nil". "

It will not be taxable if it is below 5000/-.

Saket Sinha (Student) (129 Points)
Replied 24 October 2012

It is always taxable my freinds.

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(Guest)

Originally posted by : Saket Sinha
	It is always taxable my freinds.

Mr. Saket,

Just go through Sub-rule 7(iv) of Rule 3 once.

Varshit Shah (Self Employed) (676 Points)
Replied 25 October 2012

Dear Saket ,

Pls tell me under which Sub head of salary you will consider this GIFT.

Sub Heads of Salary :
1.) Sec. 15 - Salary includes Salary due , Advance Salary , Arrears of salary
2.) Sec. 17(3) - Profits in lieu of salary ( payment form URPF , Key Man insurance)
3.) Allowances
As you said allowance in earlier comment , Allowance means amount given to employee to meet the expenditure. So you can not consider such gift under allowance. There are three typres of allowances,
1. Fully Taxable ( DA , City Compensatory )
2. Partly Taxable ( HRA , Transport , Education Allowance ) (sec. 10)
3. Exempt as it is based on actual claim ( like Conveyance , Uniform )

4.) Perquisites : many items. (incl. Gift)

So all above heads are very specific about the taxabality of any items.

Even u/s 56 (ii) - where any individual has recd cash gift from ANY PERSON in an assessement year will not be taxable if such amount is below 50000/-.

Pls refer all these provision.

Saket Sinha (Student) (129 Points)
Replied 25 October 2012

Dear varsh*t

I am sayig that whenver any employee receives cash as a gift then this taxable as allowance because perquisites are never paid in cash to employees. on the other hand if an employee receives gift in the nature of voucher like Gift voucher of adidas worth Rs 5000 or less then this will be exempted.

If cash paid to employees are exempted the what is the difference between perquisite and allowance.

Firstly you clear your concept regarding what is allowance and what is perquisite.

The policy of the company needs to be changed to not to give cash as gift but to give vochers instead of paying cash to avoid any tax burden.

Saket Sinha (Student) (129 Points)
Replied 25 October 2012

Please refer Vinod Singhania for further clarifications.

Varshit Shah (Self Employed) (676 Points)
Replied 25 October 2012

@ Saket :

Dear friend behave like a professional. No where i have mentioned that you are weak in your concept. You dont have any right to use such statement. Respect your colleagues. I really felt insulted.

We are here to share our knowledege , not for putting mud on each others face. My opinion is not binding on anyone. You have use some statement "Mr. sai you have to " , boss keep your ego in your pocket.

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(Guest)

Originally posted by : Saket Sinha
	whenver any employee receives cash as a gift then this taxable as allowance because perquisites are never paid in cash to employees.

I agree with this .

Thanks for updating my knowledge base.