Pre-requisite of Taxes: A perk is an additional benefit provided by an employer, in cash or in kind, apart from regular salary and allowances. It may be in cash or in kind and results in a personal benefit to the employee. Valuation of rent-free unfurnished accommodation. For the purpose of valuation of rent-free unfurnished accommodation, the employees have been grouped as follows:

Union or State Government employees
Semi Government employees
Employees in private sector

Union or State Government employees or Government employees on delegation to a public sector undertaking or a Government body. Valuation is taken at the rent that would have been payable by the employee in accordance with the rules framed by the Government for allotment of houses to its officers.

Employees in private sector

• Fair Rent is the municipal valuation of the accommodation, or rent which a similar accommodation would realize in the same locality, whichever is higher. However, it cannot exceed the standard rent, if any, fixed or determine under a Rent Control Act. If the employer hires the accommodation, Fair Rent Value is the actual rent paid for the accommodation.
   

• Basic Salary, Dearness Allowance/ pay if the terms of employment so provide like Bonus; Commission; Fees.
   

• All other taxable allowances (however, allowances to the extent are exempt need not be include), Income and professional taxes paid by the employer on behalf of his employee.

Value of Perquisites

• Valuation of rent-free furnished accommodation: Calculate the perquisite value of unfurnished accommodation as per the applicable category. Add either of the following to value of the unfurnished accommodation so arrived at,10% of the original cost of furnishings, if the furnishings are owned by the employer, or the actual hire charges if the furnishings are taken on hire.
   

• Value of accommodation provided at a concessional rent: Calculate the perquisite value of unfurnished or furnished accommodation as per the applicable category Deduct the rent actually paid from the perquisite value so determined to arrive at the taxable perquisite value.
   

• Valuation of motor car provided for personal use by the employer

  • In case the employee owns the and the employer pays the maintenance and running expenses.

  • In case the car is provided by the employer and

  • Maintenance and running expenses are paid by employer or

  • Maintenance and running expenses are met by employee.
     

• Valuation of the perk in case the employee owns the car

  • If car is used for official purpose - it is not taxable .

  • If car is used for both official and private purpose a reasonable proportion of the sum actually spent by the employer is taxable.

  • If used wholly for private purpose the entire amount spent by the employer is taxable

  • However, if the car is used for both personal and official purposes, then the above expenses are taxable on a proportionate basis as per the usage of car.
     

• Valuations of other conveyance like two wheelers

  • If the employee uses a two wheeler provided by the employer partly for official purposes, and partly for personal purposes, a reasonable proportion of amount spent by the employer on running, maintenance and the normal wear and tear is treated as a perk and is chargeable to tax in the hands of the employee.

  • If the two wheeler is wholly used for personal purposes then the entire amount actually spent on the expenses mentioned above and the normal wear and tear is taxable as perk.

  Educational Facilities provided by the employer
   

• The actual expense incurred or reimbursed by the employer for providing educational facilities to the family of the employee is added to the employee’s salary. However, if the educational institution is maintained by the employer, the value of perk is determined with reference to cost of education in a similar institution in or near the locality, and in such cases, is taxable in the hands of specified employees only.

In Case of Air Travel 

• An amount not exceeding the air economy fare of the National Carrier by the shortest route to the destination; Where place of origin of journey and destination are not connected by air but connected by rail or by any other mode of transport, an amount not exceeding the first class AC rail fare by the shortest route; and Where the place of origin of journey and destination or a part of it is not connected by rail, the amount eligible for exemption an amount not exceeding the first class or deluxe class fare by the shortest route, on a recognized public transport system, if such a system exists ; and
   

• An amount equivalent to the first class AC rail fare, for a journey by the shortest route in case a recognised public transport system is not present.An individual can claim the exemption in respect of only two of his children born on or after October 1, 1998. Children born out of multiple birth (e.g. twins) after the first child born after October 1, 1998, will be treated as one child.
  
                         Perks under the Income Tax Act
   

• Rent free or concessional accommodation provided by the employer Any amenity granted or provided free of cost or at concessional rate to an employee
   

• has a substantial interest in the company; does not fall in the above categories but whose salary income excluding all non-monetary benefits or amenities exceeds Rs. 24,000 per annum; Any specified security allotted or transferred, directly or indirectly, by any person free of cost or at concessional rate to an employee; Any sum paid by the employer in respect of any obligation that would otherwise have been paid by the employee; Amount payable by the employer, whether directly or through a fund other than a recognized provident fund or approved superannuation fund or a deposit-linked insurance fund, to effect an assurance on the life of the employee or to effect a contract for an annuity.