Perquisites

What is Perquisites?

Section 17(2) defines perquisites as benefits or amenities provided by an employer, in cash or kind, to employees. The Income Tax Rules give specific valuation methods for each type. Rent-free accommodation is valued at 10% of salary in cities with population over 40 lakh, 7.5% between 15 lakh and 40 lakh, and 5% elsewhere (recent rule revision in 2023). Company car for personal use is valued at ₹1,800 per month (small car) or ₹2,400 per month (large car), plus ₹900 if a driver is provided. ESOP perquisite is the difference between fair market value on exercise date and the exercise price. Concessional loans are valued at SBI rate minus rate charged. Club memberships, gas, electricity bills paid by employer, gift vouchers above ₹5,000 are all taxable too. Medical reimbursement up to ₹15,000 was earlier exempt but is now part of standard deduction. Telephone and broadband at the employee's residence used for work are generally exempt.

Example

Rohan gets a company car (small) plus driver. Perquisite value: (₹1,800 + ₹900) x 12 = ₹32,400 added to taxable salary. He also exercises ESOPs worth ₹5,00,000 fair value at an exercise price of ₹1,00,000. ESOP perquisite: ₹4,00,000 added to salary in the year of exercise.

How Perquisites is used

Payroll software computes perquisite values monthly based on usage and policy, adds them to taxable salary, and shows them separately on Form 16 Part B. ESOP perquisite is taxed at exercise; capital gains apply later at sale.

Perquisites FAQs

Is a company laptop a taxable perquisite?

No. Laptops, desktops, and computers given for use are exempt under the rules. Mobile phones for work are also exempt.

Are gift vouchers from the employer taxable?

Gifts up to ₹5,000 per year in aggregate are exempt. Anything above is fully taxable.

How is rent-free accommodation valued?

For private-sector employees, it is a percentage of salary based on city population (5%/7.5%/10%) under the revised 2023 rules.