Every month, it’s not just your salary that gets credited into your bank account, but an employee might also receive extra benefits or facilities in addition to their salary.
These are called perquisites, or simply perks and they could be in form of either cash or kind.
A few examples of perks can be accommodation or car provided by company, gift cards, interest-free loans, ESOPs/RSUs, etc.
Perquisites are a part of your total cost to company (CTC) and might impact your take-home pay.
Let’s now understand the taxation of perquisites.
How are perquisites taxed?
Perquisites are considered part of your salary income and are supposed to be taxed at your slab rates. But not all perks are taxable, and it depends on the nature of benefits received, who’s your employer, and the tax regime you opt for.
Here’s a detailed list of common taxable perquisites:
- Company-owned vehicle: The benefit of using a company-owned car for personal purposes.
- Interest-free or concessional loans: The taxable amount shall be the difference between the market rate of interest and the interest paid by employer
- Educational expenses: Payment or reimbursement of education expenses of the children or dependents of an employee.
- Payment of an employee’s helper’s salary by the employer
Now below are common non-taxable perks:
- Fringe benefits: Company-provided laptops/computers, refreshments during office hours, etc.
- Health insurance premium: Premiums incurred by the employer in respect of health insurance coverage taken for the employee and his family.
- Medical expenses reimbursed when employee had made actual medical expenditure.
- Travel expenses: Expenditure incurred while travelling for business purposes or for personal purpose subject to the conditions of leave travel allowance.
- Mobile and internet bills: Reimbursement of mobile phone bills and internet expenses incurred on account of official work.
- Employer contribution to retirement schemes (like NPS, EPF) up to a total of ₹7.5L per annum
Remember, most of these non-taxable perquisites are not exempt under the new tax regime.
How to report perquisites in your ITR?
Perquisites are added to the gross salary of the individual under the income head “Income from salary”. You show it as salary u/s 17(2).
In case you want to claim any tax exemption against perquisites as per the laws, you can disclose it under the label ‘Allowances exempt u/s 10’, which will eventually reduce the amount of taxable perquisites, and tax will be charged on the net amount.
If you have any questions related to the taxability of a specific perquisite you’re receiving, let us know in the comments below.
Hope this helps!