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Microlesson · 5-min read

Tax-free perquisites available to all employees

## Tax-Free Perquisites (Available in All Cases)

The following perquisites are exempt for all employees:

1. Telephone facility — telephone/mobile services at the employee's residence are tax-free. But a telephone allowance (cash) is always taxable.

2. Transport facility — free/discounted transport provided by an employer engaged in the passenger or goods transport business is exempt.

3. Privilege passes — privilege passes/tickets issued by Indian Railways to its employees are exempt.

4. Overseas perquisites by Government — perquisites provided by the Government to Indian citizens for services rendered abroad are exempt (allowances are also exempt u/s 10(7)).

5. Group insurance contributions — employer contributions to a staff group insurance plan are tax-free.

6. Personal accident insurance — annual premiums paid by the employer on employees' personal accident policies are exempt.

7. Office refreshments — refreshments during working hours on office premises are tax-free.

8. Subsidised meals — meals up to ₹50 per meal are exempt if the employee opts out of the default (new) tax regime (includes paid vouchers, non-alcoholic beverages and food).

9. Recreational facilities — general recreational/club facilities are exempt provided they are not restricted to a few selected employees.

10. Training expenses — costs of employee training/refresher courses, including boarding and lodging, are exempt.

11. Welfare fund contributions — contributions to recognised PF, superannuation funds or deposit-linked insurance funds are tax-free up to specified limits.

12. Leave Travel Concession (LTC) — exempt under specified conditions if the employee opts out of the default regime. For High Court/Supreme Court judges and their families, LTC is fully exempt without conditions if they opt out of the default regime under Section 115BAC(1A).

13. Medical facilities — exempt within specified limits.

14. Rent-free official residence — exempt for High Court and Supreme Court judges under certain conditions.

15. Conveyance for judges — conveyance provided to High Court and Supreme Court judges is exempt if they choose the optional (old) tax regime.

⚠️ Common exam mistakes

  • Treating a telephone allowance (cash) as exempt — only the telephone facility in kind is tax-free; the allowance is always taxable.
  • Allowing the ₹50-per-meal subsidised-meal exemption and LTC exemption under the default new regime — these require the employee to opt out of the default regime.
  • Exempting recreational/club facilities that are restricted to a select few employees.
  • Confusing the conditional LTC for ordinary employees with the unconditional LTC exemption for HC/SC judges who opt out of the default regime.
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