BAJAJ BROKING
July 07, 2025
4 mins read
Perquisites are extra benefits that employers give employees, apart from salary. These can be things like free housing, a company car, or paid medical bills. Some perquisites are taxed, while others are not. The rules depend on how the benefit is used and what kind of perquisite it is.
Understanding perquisites in income tax helps both employers and employees. It ensures that the right amount of tax is paid. It also helps in planning better when filing your income tax return.
Employers must report the value of perquisites. This amount is added to the salary for tax. If you receive these benefits, knowing which ones are taxable will help you avoid mistakes.
Some perquisites, like mobile phones for office use, are tax-free. Others, like personal car use, are fully taxable. Knowing the difference helps in claiming the right tax rebate and filing taxes correctly.
Perquisites in salary are non-cash benefits given by employers. These are in addition to your monthly pay. They may include things like a rent-free house, free meals, or help with school fees.
Some perquisites are fully taxable. Others are tax-free if they meet certain rules. For example, laptops for office use are not taxed.
Perquisites form a part of your total income. They are included while filing your income tax return. The employer must show them in Form 16. Knowing about these benefits helps you understand your full earnings and how they affect your taxes.
Here are some examples of perquisites offered by employers:
Free house or flat
Personal car from the company
Utility bills paid by the employer
School fees for children
Paid club membership
Free food at work
Personal domestic staff
Free or low-interest loans
Health insurance by the employer
Free mobile phone for work
Laptop for office use
Travel for family
Gifts or vouchers up to ₹5,000
Stock options
Credit card bills paid by the company
Some of these are taxable, while others are not. For example, meals at work and office phones are tax-free. But if the company pays your rent or personal car bills, that value is added to your income.
Understanding these perquisites in income tax helps during income tax return filing. It ensures you pay the right tax and claim all allowed tax rebates.
Perquisites are divided into three types:
These are fully taxed. Examples are a rent-free house or a car for personal use.
These are not taxed if used in accordance with specific rules. For example, laptops for work or meal coupons.
These apply to directors or employees earning high salaries. Benefits such as personal attendants or loans may be taxed only for their use.
Knowing these types of perquisites in income tax helps avoid mistakes while reporting income. Employers must inform employees of which benefits are subject to taxation.
Employees should verify whether a benefit is taxable or exempt. For example, a medical loan may be tax-deductible, but a company car used for personal purposes is taxable. All these benefits must be reported accurately during income tax return filing to avoid errors and help claim any applicable tax rebate.
The tax on perquisites depends on their type. Some are fully taxed, while others are tax-free. For example, a rent-free house is taxed, but a laptop for work is not.
Employers must calculate the value of each perquisite. This value is added to your salary and taxed based on your income slab. The rules under the Income Tax Act govern this.
These perquisites must be reported in your Form 16. When you file your income tax return, you must include these values. This helps avoid penalties and ensures you claim any tax rebate to which you are eligible.
Some perquisites are fully taxable. These include:
Rent-free house
Car for personal use
Paid club membership
Tuition for children
Domestic help
Income tax paid by the employer
Credit card bills
Low-interest or free loans over ₹20,000
Discounted company shares
These benefits are added to your income and taxed. Your employer must show them in Form 16. You need to report them while filing your income tax return.
Knowing these taxable perquisites helps you avoid errors. It also ensures you pay the right amount of tax and don’t miss any possible tax rebate.
Some perquisites are not taxed if they follow the rules. These include:
Mobile phones for office work
Laptops for job use
Free snacks at work
Gifts up to ₹5,000 per year
Employer-paid health insurance
Employer’s PF contribution within ₹7.5 lakh
Uniform allowance
Tools for official use
Emergency medical loans
These tax-free benefits are not added to your income. But they must be used only for work or as allowed by law.
When you file your income tax return, do not include these perquisites if they are exempt. Keep all bills or records in case they are needed later.
Utilising tax-exempt perquisites strategically can help reduce taxable income and potentially increase your tax rebate. These perks also provide value without increasing your tax burden, making them beneficial for both employees and employers.
Perquisites offer many benefits to employees:
More value in the job package
Less personal spending
Tax savings through exemptions
Better job satisfaction
Use of tools or services at no cost
Help with housing or travel needs
Support for health and education
When planned well, perquisites in income tax can reduce total tax. They also improve the overall salary structure.
Employees must know which perks are taxable and which are not. This helps in the correct income tax return filing. It also ensures no mistakes or notices later and helps claim tax rebates where allowed.
Perquisite | Taxable | Tax-Exempt |
Rent-free house | Yes | No |
Mobile for official use | No | Yes |
Car used for personal travel | Yes | No |
Office laptop | No | Yes |
Club membership | Yes | No |
Health insurance (by employer) | No | Yes |
Emergency loan for health | No | Yes |
Gifts below ₹5,000 | No | Yes |
Personal credit card bills paid | Yes | No |
Employer PF contribution ≤ ₹7.5 lakh | No | Yes |
This table helps employees understand which perquisites are subject to tax. Always check your salary slips and Form 16 to see the right values for income tax return filing.
The employer calculates tax on perquisites using set rules. They check the type and use of the benefit and apply fair value.
Steps include:
Find the value of the perquisite (based on usage).
Add it to your gross salary.
Deduct TDS if taxable.
Report the value in Form 16.
Use it in your income tax return filing.
Some benefits, such as a house, are taxed based on the city and salary. A car is taxed based on engine size and use. Meal coupons are tax-free up to a limit.
If the employer pays your tax, that is also treated as a taxable perquisite. Employees should always request a detailed breakdown of their benefits.
Correct tax calculation on perquisites helps avoid errors and facilitates the claiming of deductions or tax rebates. Use documents and payslips to keep track and file accurately.
Criteria | Allowance | Perquisites |
Definition | Fixed monetary amount paid regularly with salary. | Non-cash benefits are provided in addition to salary. |
Form of Benefit | Always paid in cash. | Can be in kind or services (non-monetary). |
Purpose | Helps cover work-related or personal expenses. | Enhances employees’ lifestyle or support needs. |
Tax Treatment | Some are fully/partially taxable or exempt. | Can be taxable, exempt, or taxable only for specific employees. |
Examples | HRA, Dearness Allowance, LTA, Transport Allowance. | Rent-free housing, club membership, company car. |
Applicability | Usually given to all employees in similar roles. | May be limited to senior staff or certain positions. |
Reported in Form 16 | Yes, included as part of gross salary. | Yes, separately shown as part of salary income. |
Understanding this difference helps in accurate income tax return filing and claiming the correct tax rebate.
Perquisites in income tax are key parts of your salary. They offer benefits such as housing, travel, and health coverage. Some are taxed, while others are exempt from tax.
Understanding them helps avoid tax issues. It also ensures correct income tax return filing. Your employer must report perquisites and deduct tax where needed.
Employees should check which benefits are taxed and use the tax-free ones well. This keeps taxes low and claims accurate. Knowing about perquisites helps you understand your pay better. It also helps in using tax rebates allowed under the Income Tax Act.
Disclaimer: This article is for informational use only and does not offer financial or tax advice.
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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.
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