DEFINE PERQUISITES

DEFINE PERQUISITE,WHAT VARIOUS PERQUISITES /BENEFITS/ FACILITIES ARE PROVIDED BY AN EMPLOYER TO AN EMPLOYEE IN RELATION TO SALARY.

 INTRODUCTION:
                            Perquisite is defined as any casual emolument or benefit attached to an office or position in addition to salary.    or                
   An employee benefit is any benefit provided or paid by the employer for the benefit of the employee or the employee’s family. Benefits are generally included in the employee’s SALARY for tax purposes, except those benefits that qualify for an exclusion.

Valuation of Perquisites(section 13 ITO 2001)
SECTION 13(1) SAYS
                                "For the purpose of computing the income of an employee for the tax year chargeable to tax under the head 'Salary" the value of perquisites provided by an employer to an employee in that year that is included in the employee's salary under section 12 shall be determined in accordance with this section"   
              As a general rule, the taxable value of perquisites in the hands of the employees is its cost to the employer. However, specific rules for valuation of certain perquisites as per ITO2001 are briefly given below:

• Accommodation
• Conveyance
• Services of Sweeper, Gardner, Watchman or Personal Assistant
• Supply of Gas, Electric Power or Water (Utilities)
• Interest Free or Concessional Loan Facility
• Medical charges, Hospital charges or medical allowance. 

• Provident Fund
• Entertainment
• Transfer of property or service
• Obligation of employee waived by employer.
• Obligation of employee paid by employer.
• Any Other Benefit or Amenity, Service, Right or Privilege

1. Accommodation 

   (a) House Rent Allowance:

         If an employer provides any accommodation allowance or house rent allowance, the whole amount will be fully taxable under the head income from salary.

     (b) Accommodation Facility:

     If the employer provides an accommodation, the following amount will be added in total income of the employee as value of perquisite:

1- The amount that would have been paid by the employer in case such accommodation was not provided; or 

2- 45% of the minimum of time scale of the basic salary;   whichever of (1) or (2) is higher.

Note= In areas other than big cities the house rent allowance admissible to govt. employees is 30% of minimum time scale of the basic salary.

  Conveyance:

(a) Conveyance Allowance;

   If the employer provides conveyance allowance to the employee, the whole allowance will be fully taxable under the head income from salary. 

 (b) Conveyance provide by the employer for personal use of the employee.

If the employer has provided a conveyance to employee purely for personal use, 10% of the cost paid for purchasing the motor vehicle will be included in the taxable income of the employee every year.

(c) Conveyance provided by employer partly for personal and partly for official use.

When the motor vehicle is provided by the employer both for official and personal use, 5% of the cost paid by the employer for purchasing the motor vehicle will be included in the total income of the employee.

 NOTE= If the vehicle is acquired on lease, no leasing value will be considered for this purpose. The percentage  of 5% or 10% will be applied on fair market value of the vehicle.

Medical charges, Hospital charges or Medical allowance: 

(1) In case an employee receives free medical treatment or hospitalization or both by the employer or receives reimbursement of the medical expenses under the terms of employment whole such amount.

(2) In case where the above mentioned facilities are not provided for in the terms of employment, any medical allowance given by the employer will be exempt up to 10% of basic salary of employee.

Provident Fund

Entertainment 

 Services of a sweeper, a gardener, a watchman or a personal assistant

The value of benefit to the employee or any member of his household resulting from the provision of services of a sweeper, a gardener, a watchman or a personal attendant by the employer, shall be the actual cost to the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer for such services as reduced by any amount paid by the employee for such services.

Supply of Gas, Electric Energy or Water(utilities)
If an employer provides utilities to an employee in a tax year, the amount chargeable to the tax under the head salary for that year shall include the fair market value of the utilities provided, as reduced by any payment made by the employee for the utilities.

Interest free or Concessional Loan Facility

The value of the benefit to the assessee resulting from the provision of interest-free or concessional loan for any purpose by the employer will be as follow:
        If a loan is made, on or after the 1 day of July, 2002, by an employer to  an employee and either no profit on loan is payable by the employee or the rate of profit on loan is less than the benchmark rate, the amount chargeable to tax to the employee under the head  Salary  for a tax year shall
include an amount equal to—
(a) the profit on loan computed at the benchmark rate, where no
   profit on loan is payable by the employee, or
(b) the difference between the amount of profit on loan paid by the
   employee in that tax year and the amount of profit on loan
  computed at the benchmark rate,as the case may be.
Bench mark rate for tax year 2012 is 14%. 

Obligation of employee waived by employer.
If an obligation of an employee to pay or repay an amount owing by the employee to the employer is waived by the employer, the amount chargeable to tax to the employee under the head  Salary  for that
year shall include the amount so waived.

Obligation of employee paid by employer. 

If an obligation of an employee to pay or repay an amount[owing by the employee to another person is paid by the employer, the amount chargeable to tax to the employee under the head  Salary  for that
year shall include the amount so paid.

Transfer of property or service

If property is transferred or services are provided by an employer to an employee, the amount chargeable to tax to the employee under the head ―Salary for that year shall include the fair market value of the
property or services determined at the time the property is transferred or the services are provided, as reduced by any payment made by the employee for the property or services.

Any Other Benefit or Amenity, Service, Right.
 If an employer has provided an employee with a perquisite which is not covered by sub-sections (3) through (12), the amount chargeable to tax to the employee under the head  Salary  for that year shall include the fair market value of the perquisite, as reduced by any payment made by the employee for the perquisite.
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