## Valuation of Domestic Servants [Rule 3(3)]

The taxability and value depend on who engages the servant.

Situation	Taxable for	Gross perquisite value
Employee engages the servant; employer pays/reimburses the wages	All employees	Actual amount reimbursed
Employer engages the servant and provides their services to the employee	Specified employees only	Salary/cost incurred by the employer

✓ Any amount recovered from the employee is deducted from the gross value.

### Core principle

Who hires the servant decides who bears tax. If the employee hires and the employer merely reimburses → it's a reimbursement, taxable for everyone. If the employer hires and lends the servant → it's a facility, taxable for specified employees only.

Worked example

### Example 1

Employee hires a gardener for ₹5,000/month and the employer reimburses it → perquisite of ₹60,000 p.a., taxable for ALL employees (it is a reimbursement).

### Example 2

Employer hires a watchman (cost ₹6,000/month) and posts him at the employee's home → perquisite of ₹72,000 p.a., taxable only if the employee is a specified employee.

⚠️ Common exam mistakes

Applying the 'specified employee only' rule when the employer merely reimburses the employee — reimbursement is taxable for all employees.
Using actual reimbursed amount when the employer engages the servant — the value should be the cost/salary incurred by the employer.
Forgetting to deduct amounts recovered from the employee.

Reference: Rule 3(3) — Income-tax Rules

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Valuation of domestic servants perquisite [Rule 3(3)]

Worked example

⚠️ Common exam mistakes