The One with a Private Jet
The word ‘Perquisite’ is derived from the Latin word ‘perquisitum’ meaning, something acquired for profit.
Dictionary.com defines Perquisite as,
“an incidental benefit gained from a certain type of employment, such as the use of a company car”
Ross was working in an MNC as the senior R&D head. He is a master of innovation and has many patents to his name. He wants to change his job and move to a better one which is beneficial not only in terms of money but also in terms of benefits. He has a degree in applied sciences. The new company which he wants to join has fixed a package of Rs 3 crores as basic pay, and he can choose (from a list) the perks that he will receive. He wants to know about the list of perquisites that are available and wants to choose those which are more beneficial to him. He approached his friend Susan for advice relating to the same.He approached his friend Susan for advice relating to the same.
In income tax terms, Perquisites are of two types:
|Taxable perquisite||Non-taxable perquisite|
Few examples of Taxable perquisites are:
- Rent-free accommodation:
When an employer provides employee residential accommodation without charging rent or for concessional rates it is called as rent-free accommodation or concessional accommodation.
What are the tax implications under the Income Tax Act?
If the accommodation is owned by the employer and is provided rent free / at concessional rent to employee, the perquisite value shall be :
- 15 percent of salary (in cities having population exceeding 25 lakhs as per 2001 census)
- Add: Furnishing charges (in case of furnished apartments), if any (10 percent per annum on original cost or actual hire charges of the furniture)
- Less: Rent recovered, if any, by the employer from the employee
In case cities having population less than 25 lakhs but greater than 10 lakhs – 10 percent of salary. For other cases, it is 7.5 percent of salary. Here, salary includes all taxable allowances, bonus, commission, any other monetary payments received by the employee from the employer during the period of accommodation provided.
If the accommodation is taken on lease or rent by the employer and is provided rent-free / at concessional rent to employee, the value of perquisite shall be:
- Actual amount of rent payable by employer or 15 percent of salary, whichever is lower
- Add: Furnishing charges, if any (10 percent per annum on original cost or actual hire charges) – if a furnished accommodation is provided
- Less: Rent recovered, if any by the employer from the employee.
- Any sum paid by employer in respect of an obligation which was actually payable by the employee such as supply of water electricity, gas, education, gifts exceeding the specified limits, club facilities etc.
- Motor car given by the employer if it satisfies the condition specified under Rule 3(2)(A).
- Provision for sweeper, gardener, watchman or personal attendant, the value of benefit resulting from provision of any of these shall be the actual cost borne by the employer in this respect as reduced by any amount paid by the employee for such services.
Few examples of non-taxable perquisites are:
- Provision of medical facility upto specified limit
- Refreshments provided during working hours
- Perquisites allowed outside India by Government to a Citizen of India for rendering services outside India
- Educational facility for children where the facility is owned by the employer or is provided by virtue of his employment and the value of such facility does not exceed Rs 1000 per month per child
- Interest-free or concessional loan upto Rs 20,000
The taxable perquisites will be included as a part of salary and shall be assessed to tax in the hands of the assessee under the head Income from Salary.
After listening to all this, Ross decided to opt for the perks which were more beneficial to him.