Perquisite Valuation

On this page:

  1. Perquisite Valuation
  2. Taxable value of Rent-Free Unfurnished Accommodation
  3. Taxable value of Rent-Free Furnished Accommodation
  4. Taxable value of Concession in Rent
  5. Domestic Servant New Rule 3(3)
  6. Gas, Electric Energy and Water New Rule 3(4)

Perquisite Valuation - Income Tax India

As per section 17(2) "Perquisite" includes

  • The value of any rent-free accommodation provided to the assessee by his employer;

  • The value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer;

  • The value of any benefit or amenity (not being a benefit provided by a company free of cost or at concessional rate to its employees by way of allotment of shares, debentures or warrants directly or indirectly under Employees' Stock Option Plan or Scheme of the company, in accordance with the guidelines issued in this behalf by the Central Government) granted or provided free of cost or at concessional rate in the following cases: -

    • A company to a Director of that company;

    • A company to an employee being a person who has substantial interest (i.e., holding beneficially shares amounting not less than 20% of the total voting power) in the company;

    • An employer (including a company) to an employee (other than the above referred employees), whose salary computed as below does not exceed Rs.50,000/-.

    Basic Salary xxx
    Monetary Benefits xxx
    Less: Exemptions u/s 10 xxx
    ---
    xxx
    ---
    Gross Salary xxx
    Less: Deductions u/s 16 xxx
    ---
    Salary for the above purpose xxx
    ---
  • Any obligation payable by the employee, which is being met by the employer;

  • Any sum payable by the employer to effect an assurance on the life of the assessee or to effect a contract for annuity;

  • The value of any other fringe benefit or amenity, which is not chargeable in the hands of Employer.

However, Perquisite Valuation does not include certain medical benefits, which have been discussed at a later stage.

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Perquisite Valuation of Rent-Free Unfurnished Accommodation

S.No Circumstances Perquisite Value
1. Where Government provides the accommodation to a person holding an office or post in connection with the affairs of the Union or State or serving with any body or undertaking under the control of such Government on deputation. Licence fee determined by Union or State Government in respect of accommodation in accordance with the rules framed by that Government.
2. Where any other employer provides such accommodation.

Where accommodation is owned by employer: -

Perquisite Value is -

  • 15% of the salary in cities having population more than 25 lakhs as per 2001 census.
  • 10% of the salary in cities having population more than 10 lakhs but up to 25 lakhs as per 2001 census.
  • 7.5% of salary in other cities.

Where accommodation is taken on lease or rent by the employer: -

Perquisite Value is least of the following -

  • Actual amount of lease rental paid or payable by the employer
  • 15% of the salary.

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Perquisite Valuation of Rent-Free Furnished Accommodation

The Perquisite Valuation of rent-free furnished accommodation provided by the employer during the previous year to the employee is done in the following manner: -

For accommodations listed in S.No.1 & 2 of the table above: -

Value of Rent-Free Unfurnished Accommodation xxx

Add: Value of Furniture & House-hold Equipments: -

10% of Original Cost of Furniture if furniture is owned by the employer

Hire Charges Payable if the furniture is hired by the employer

xxx
Value of Rent-Free Furnished Accommodation xxx

Value of Hotel Accommodation

No valuation of unfurnished Hotel Accommodation has been prescribed in Rule 3. Hence, it is presumed that no perquisite is chargeable, if unfurnished Hotel Accommodation is provided to the employee.

Perquisite value in respect of Furnished Hotel Accommodation is provided as the lower of the following: -

  • 24% of the Salary paid or payable for the period of stay as a proportion to the salary paid or payable for the previous year
  • Actual Charges paid or payable to such hotel

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Perquisite Valuation of Concession in Rent

The Perquisite Valuation of concession in rent of accommodation provided by the employer during the previous year to the employee is done in the following manner: -

Value of the accommodation, as if it is Rent-Free accommodation xxx
Less: Rent Paid by Employee xxx
Perquisite Value xxx

Exempt Perquisites in respect of Residential/Hotel Accommodations

The following perquisites in respect of rent free accommodation or concession in rent of accommodation are not chargeable to perquisite with effect from 01.04.2001: -

  1. Accommodation
    1. being of a temporary nature and having plinth area not exceeding 800 square feet, located not less than 8 kms away from the local limits of any municipality or a cantonment board; or
    2. located in a `remote area' provided to an employee working at: -
      • a mining site, or
      • an onshore oil exploration site, or
      • a project execution site, or
      • a dam site, or
      • a power generation site, or
      • an offshore site.
  2. Where on account of his transfer from one place to another, the employee is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the perquisite value in respect of accommodation having lower value shall be chargeable for a period not exceeding 90 days. [Perquisite value exceeding 90 days shall be chargeable in respect of both the accommodations].

Explanations and Definitions in Valuation of Accommodation

As per Explanation to Rule 3(1), where the accommodation is provided by the Central Government or any State Government to an employee who is serving on deputation with any body or undertaking under the control of such Government: -

  1. the employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation; and
  2. the value of perquisite of such an accommodation shall be the amount calculated, as if the accommodation is owned by the employer.

Accommodation includes a house, flat, farmhouse or part thereof, or accommodation in a hotel, motel, service apartment, guesthouse, caravan, mobile home, ship or other floating structure. [Explanation (i) to Rule 3].

Hotel includes licensed accommodation in the nature of motel, service apartment or guest- house. [Explanation (iii) to Rule 3].

Remote Area means an area located at least 40 kilometres away from a town having a population not exceeding 20,000 based on latest published all-India census. [Explanation (v) to Rule 3].

As per Explanation (vi) to Rule 3, "Salary" includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called from one or more employers, as the case may be, but does not include the following: -

  1. dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned;
  2. employer's contribution to the provident fund account of the employee;
  3. allowances which are exempted from payment of tax;
  4. the value of perquisites specified in section 17(2) of the Income-tax Act;
  5. any payment or expenditure specifically excluded under proviso to section 17(2)(iii) or proviso to section 17(2);
  6. lump-sum payments received at the time of termination of service or superannuation or voluntary retirement, like gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and similar payments.

but includes any amount reimbursed by way of tax by the employer as per CBDT Letter F.No.35/26/64-IT(B) dated 25.05.1964.

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Perquisite Valuation of Domestic Servant New Rule 3(3)

The taxable value of domestic servants provided by the employer during the previous year to the employee or the member of the household: -

Salary paid or payable by the employer or any other person on his behalf, as reduced by any amount paid by the employee for such services.

Perquisite Valuation of Gas, Electric Energy and Water New Rule 3(4)

The following table gives the taxable value of Gas, Electric energy and Water provided by the employer during the previous year for his household: -

S.No. Source Perquisite Value
1. Provided from resources owned by the employer. Manufacturing cost per unit incurred by the employer.
2. Purchased from outside agency and used wholly for Official purpose. Not a perquisite.
3. Purchased from outside agency and used wholly for Private purpose. Amount paid by the employer to the agency
2. Purchased from outside agency and used partly for Private and partly for Official Purpose. Amount paid to agency for the portion home consumed.

Where the employee pays any amount for the above service, the same shall be reduced from the perquisite value determined above.

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Great things are not done by impulse, but by a series of small things brought together. Vincent van Gogh

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