July 07, 2025
4 mins read
Perquisites are things that employers give you in addition to your salary, like a company car or free housing. These perks, also known as fringe benefits, are a key component of your overall compensation package.
It is important to understand perquisites in income tax because some are taxed and others are not. Knowing the rules for perquisites in income tax helps you file your taxes correctly and plan your money better.
Perquisites are advantages that employees get on top of their income, and they are generally not cash. They include perks or benefits that businesses give to make employees happier and more motivated at work. These are considered taxable income under pay rules.
Some common examples are free housing, business automobiles, low-interest loans, and free utilities. Other examples are medical facilities, club memberships, stock options, and reimbursements for personal expenses. These benefits are different for each company and level of employee, and they may be good for both money and lifestyle.
Employers give you different benefits, such as a free house, a company car for personal use, paid utility bills, or even school fees for your kids.
Some benefits, like office phones, are tax-free, while others, like paid rent, are taxed. This information will help you fill out your tax return correctly.
These benefits, like a rent-free home or a car for personal trips, are fully taxable. For tax purposes, their value is added directly to your salary.
These perks are not taxed if they are used according to specific rules. A laptop for work, meal coupons, or recreational facilities for all employees provided by the employer are some examples.
Certain benefits, like a personal attendant or a gardener, are taxed only for specific employees, such as company directors or those with a substantial interest in the company.
Fully taxable perquisites include a rent-free house, a car for personal use, and paid club memberships. These benefits are always added to your total income for taxation.
Your employer must report these in your Form 16. It is crucial to declare them accurately while filing your income tax return to avoid any discrepancies.
If you follow the rules, some perks are tax-free. For example, if your boss gives you a cell phone or laptop for work, you don't have to pay taxes on it.
Similarly, gifts in kind received from your employer up to ₹5,000 in a financial year are exempt from tax. Anything above this amount is taxable.
Your employer's contribution to your provident fund (PF) up to ₹7.5 lakh annually and any health insurance premiums paid on your behalf are also tax-exempt benefits.
Some income tax rules say that the employer is responsible for figuring out how much the perks are worth for tax purposes. Steps to ensure tax deduction accuracy:
Step 1: Determine Perquisite Value: First, figure out how much each benefit is worth. The value of a car, for example, depends on how big its engine is and whether it is for business or personal use.
Step 2: Add to Gross Salary: You then add this number to your total salary income to find out how much you owe in taxes for the year.
Step 3: Deduct TDS: The employer takes out the Tax Deducted at Source (TDS) from this higher salary amount before giving it to you.
Step 4: Report in Form 16: Finally, your Form 16 clearly shows the total value of the perks and the TDS that was taken out.
Perks make your job offer much better overall. They provide extra value beyond your salary and help you reduce personal expenses on things like housing or travel.
Many perks offer tax advantages. Income tax perks like meal coupons and medical benefits can lower your taxable income.
These benefits boost job satisfaction. Access to a company car, club memberships, or other facilities at no personal cost makes your work experience much more rewarding.
They provide crucial support for your needs, like health insurance or educational assistance for children. This will give you and your family peace of mind.
Additional Read: What is Section 194B of the Income Tax Act?
Criteria | Allowance | Perquisites |
Definition | A fixed cash amount paid regularly with your salary. | Non-cash benefits or facilities provided in addition to salary. |
Form of Benefit | Always given in the form of money. | Usually given in kind (e.g., a car) or as a service. |
Purpose | Intended to help you cover specific expenses (e.g., rent). | Designed to enhance your lifestyle or provide support. |
Tax Treatment | Can be fully taxable, partly exempt, or fully exempt. | Can be taxable, exempt, or taxed only for specific employees. |
Examples | House Rent Allowance (HRA), Leave Travel Allowance (LTA). | Rent-free housing, company car, paid club memberships. |
Applicability | Usually given to all workers of a certain grade. | Often given to workers based on their job title or level of experience. |
Reported in Form 16 | Yes, it is part of your gross salary. | Yes, your salary details show its taxable value separately. |
Perquisites in income tax are a big part of your salary because they give you useful benefits like health insurance or housing. Some of these benefits are taxed, but many of them are not.
If you know these rules, you won't have any problems with your taxes and you will file your income tax return correctly. Your boss needs to report them correctly.
You should check which benefits are taxable and make many of the tax-free ones. This helps you lower your tax outgo and understand your complete compensation package better.
Share this article: 
No result found
Yes. Some perquisites are taxable, like a free house or car. Others, like a mobile phone for work, are not taxed. Tax depends on the benefit type.
Perquisites in CTC are benefits like a rent-free house, free meals, or medical help. These are added to your salary but are not always subject to taxation.
Taxable perquisites include a rent-free house, paid club fees, and a company car. These must be shown while filing your income tax return.
If you don’t report perquisites properly, you may face tax notices, penalties, or interest. Always check your Form 16 and file it correctly.
No. Employer PF contribution up to ₹7.5 lakh yearly is not a perquisite. If it exceeds, the additional part is taxed.
Employees can lower taxes by using tax-free perquisites like mobile bills for work, free snacks, or health cover. These give value without adding tax.
Employers must value, report, and deduct tax on perquisites. They must show these in Form 16 to help employees file their taxes on time.
Disclaimer :
The information on this website is provided on "AS IS" basis. Bajaj Broking (BFSL) does not warrant the accuracy of the information given herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or suitability for any particular purpose. While BFSL strives to ensure accuracy, it does not guarantee the completeness, reliability, or timeliness of the information. Users are advised to independently verify details and stay updated with any changes.
The information provided on this website is for general informational purposes only and is subject to change without prior notice. BFSL shall not be responsible for any consequences arising from reliance on the information provided herein and shall not be held responsible for all or any actions that may subsequently result in any loss, damage and or liability. Interest rates, fees, and charges etc., are revised from time to time, for the latest details please refer to our Pricing page.
Neither the information, nor any opinion contained in this website constitutes a solicitation or offer by BFSL or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service.
BFSL is acting as distributor for non-broking products/ services such as IPO, Mutual Fund, Insurance, PMS, and NPS. These are not Exchange Traded Products. For more details on risk factors, terms and conditions please read the sales brochure carefully before investing.
Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
For more disclaimer, check here : https://www.bajajbroking.in/disclaimer
Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading
Open Your Free Demat Account
Enjoy low brokerage on delivery trades
|
Please Enter Mobile Number
Open Your Free Demat Account
Enjoy low brokerage on delivery trades
|
