by A perquisite is a benefit, facility or advantage provided by an employer to an employee in addition to the employee’s regular salary. Under the Income tax Act, 2025, Section 17 deals with perquisites and their tax treatment while computing income under the head “Salaries.” Perquisites may be provided in cash or in kind and may be available to the employee or to a person connected with the employee, depending on the applicable provisions. A perquisite is taxable only according to the specific rules and valuation provisions prescribed under the Act.
Common Examples of Perquisites:
| Perquisite | Explanation |
|---|---|
| 1. Rent Free Accommodation | Accommodation provided by the employer without charging rent, subject to prescribed valuation rules. |
| 2. Concessional Accommodation | Accommodation provided to an employee at a rent lower than its prescribed value. |
| 3. Motor Car Facility | A motor car provided by the employer for personal or partly personal use may constitute a taxable perquisite. |
| 4. Interest Free or Concessional Loan | A loan provided by the employer at no interest or at a concessional rate may be taxable subject to specified conditions. |
| 5. Free or Concessional Education | Educational facilities provided to an employee or specified family members may be taxable subject to applicable rules. |
| 6. Free Meals | Meals or refreshments provided by the employer may constitute a perquisite, subject to prescribed exemptions and conditions. |
| 7. Employer’s Contribution | Certain contributions made by the employer towards specified funds or schemes may become taxable when the prescribed limits or conditions are exceeded. |
| 8. Club or Other Facilities | Certain club memberships, facilities or benefits provided by the employer may be taxable according to the prescribed rules. |
Tax Treatment
Perquisites are generally included in the employee’s salary income when they are taxable perquisites. However, some benefits are specifically exempt or are taxable only when certain conditions are satisfied. The value of a perquisite is determined according to the valuation rules prescribed under the Income tax law.
For example, if an employer provides an employee with rent free accommodation, the taxable value is not necessarily equal to the market rent. It is calculated according to the prescribed valuation method.
Therefore, perquisites are an important component of salary income, and their proper identification and valuation is necessary for calculating the employee’s taxable income and the employer’s TDS liability.
