Indian Income Tax Issues

The term, “perquisite” is defined under Section 17(2) of the Income Tax Act. This is an inclusive definition, meaning whatever is not included cannot be supposed to be excluded. The following items are included in the definition of perquisite:

1. Value of rent-free accommodation provided by employer to the employee (Section 17(2)(i))

2. Value of any concession granted in rent for any accommodation provided by employer to employee (Section 17(2)(ii)). This also includes the concession deemed to have been provided under certain circumstances.

3. Value of any benefit or amenity granted or provided by employer to employee free of cost or at concessional rate in any of the following cases (Section 17(2)(iii)):

b. By a company to its employee who is having substantial interest in the company.

c. By any employer including a company to an employee whose annual income from salary is Rs.50000 or more (other than covered above)

Note: Use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place of work to his residence, cannot be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate.

Specified Employee:

1. Employee-Director

2. Employee having substantial interest in the Company: If he is the beneficial owner of 20% or more voting power in the employer company.

3. Whose income under the head “salaries” whether due from or paid or allowed by, one or more employees, exclusive of benefits or amenities not provided for by way of monetary payment, exceeds Rs.50,000.

4. Any sum paid by the employer in respect of certain obligations of the employee, which, but for such payment, would have been met by the employee himself (Section 17(2)(iv))

5. Any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund or a deposit-linked insurance fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 or, as the case may be, Section 6C of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, to effect an assurance on the life of the assessee or to effect a contract for an annuity. (Section 17(2)(v)).

6. The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee (Section 17(2)(vi)).

7. The amount or the aggregate amounts of any contribution made to the account of the assessee by the employer:

d. The annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme or scheme referred to in above to the extent it relates to the contribution referred to above which is included in the total income in any previous year computed in such manner as may be prescribed.

8. The value of any other fringe benefit or amenity as may be prescribed. (Section 17(2)(viii)).

The value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer will not be considered as a perquisite under certain circumstances.