Perquisites — meaning and classification [Section 17(2)]

## Perquisites [Section 17(2)]

### Meaning

A perquisite is a benefit provided to an employee over and above regular salary/wages — e.g. housing, a car, allowances. It may be given in cash or in kind. Reimbursement of expenses incurred for official duties is not a perquisite.

> If a benefit (e.g. a company house) continues after employment ends, it is no longer salary — it is taxed as Income from Other Sources.

### Three categories of perquisites

1. Perquisites taxable for all employees.

2. Tax-free perquisites for all employees.

3. Perquisites taxable only for specified employees.

### Perquisites taxable in the hands of ALL employees

1. Rent-free accommodation.

2. Accommodation at a concessional rate.

3. Any personal expense of the employee paid by the employer (e.g. salaries of household staff).

4. Amount payable by the employer to effect an assurance on the life of the assessee.

5. Value of specified security or sweat equity shares allotted/transferred free or at concession.

6. Clause 17(2)(vii): Aggregate employer contribution to the assessee's RPF + NPS [80CCD] + Approved Superannuation Fund exceeding ₹7,50,000 is taxed and included in gross salary (the "excess employer's contribution").

7. Clause 17(2)(viia): Annual accretion (interest/dividend etc.) on the balance relating to the excess employer's contribution is a taxable perquisite — computed under CBDT Rule 3B.

8. Any other fringe benefit or amenity (gift, credit card, movable assets, loans, telephone, club, food, etc.).

### Rule 3B formula (annual accretion)

Taxable Perquisite (TP) = (PC ÷ 2) × R + (PC1 + TP1) × R

Cap: Where (TP1 + PC1) exceeds the aggregate fund balance on the first day of the current PY, the excess is ignored when computing (TP1 + PC1).