Income under the Head Salaries (Perquisites and Retirement Benefits)
Income of a person is computed under head Salary when there is relation of Employer and Employee between the giver and receiver of the income. Any cash or non cash benefits provided by employer to its employee are taxable in hands of employee. Non cash benefits are known as Perquisites.
Definition: As per Section 17(2) Perquisite means:
• The value of rent-free accommodation provided to the assessee by his employer;
• The value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer;
• The value of any benefit or amenity granted or provided free of cost or at concessional rate to specified employees
• The value of any specified security allotted or transferred, directly or indirectly, by any person free of cost or at concessional rate, to an individual who is or has been in employment of that person
• Any sum paid by the employer in respect of any obligation which but for such payment, would have been payable by the assessee;
• Any sum payable by the employer, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund or a Deposit-linked Insurance Fund
• Any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family
Value of Accommodation provided rent free or at concessional rates
ACCOMMODATION: Accommodation provided by the employer to an employee may be
• Free Accommodation
• Accommodation at concessional Rate.
Rent Free Accommodation: It is accommodation provided by employer for free of cost to its employee. It may be
Unfurnished Rent Free Accommodation Provided by Govt: License fee determined by Union or State Government in respect of accommodation in accordance with the rules framed by that government as reduced by the rent actually paid by the employee.
Furnished Rent Free Accommodation Provided by Govt:
Calculate Value of accommodation as unfurnished
ADD 10% p.a. of the cost of furniture
ADD if such furniture is hired from a third party, the actual hire charges payable for the same reduced
LESS any charges paid or payable for the same by the employee during the previous year.
Where the Rent Free Accommodation is provided by any other employer and the accommodation is owned by the employer: Value of perquisite will be
• 15% of salary in cities having population exceeding 25 lakh
• 10% of salary in cities having population exceeding Rs.10 lakh but not exceeding 25 lakh as per census of 2001,
• 7.5% of salary on other cities
Where the Rent Free Accommodation is provided by any other employer and the accommodation is not owned by the employer:
Value of perquisite will be
• 15% of salary
• Actual amount of lease rental paid or payable by the employer
Whichever is lower as reduced by the rent, if any, actually paid by the employee.
In case Accommodation is provided IN A HOTEL FOR ALL EMPLOYEES
24% of salary paid or payable for the previous year or the actual charges paid or payable to such hotel, which is lower, for the period during which such accommodation is provided as reduced by the rent, if any, actually paid or payable by the employees.
These online MCQ mock tests and MCQ questions includes all main concepts of the chapter (Income under the Head Salaries (Perquisites and Retirement Benefits)) in CS Executive Module I Tax Laws & Practice (MCQ based OMR) Exam.