Perquisites Valuation for Salaried Employees

Section 17(2) of the income tax act, 1961 defines Perquisites and it includes within its gambit a variety of perquisites provided by the employer.   This articles provides an insight into the valuation of these perquisites.

Provision of Unfurnished Accommodation

If the employee is employed with Central or State Government the valuation of accommodation is

• licence fee determined by the concerned government
• Less rent actually paid by the employee

If the employee is employed by other "employers" then

1. if the accommodation is owned by the employer then the valuation
• is 15% of salary in cities having population exceeding 25 lacs as per 2001 census or
• is 10% of salary in cities having population exceeding 10 lacs but less than 25 lacs as per 2001 census or
• is 7.5% of salary in other places
2. if the accommodation is leased / rented by the employer then the valuation
• is 15% of salary or
• actual amount of lease rent payable by the employer

         whichever is lower, and reduced by any amount of rent paid by the employee

If accommodation is provided in a hotel for a period exceeding 15 days on transfer from one place to another then valuation is

• 24% of annual salary or
• actual charges payable to the hotel as reduced by the amount paid by the employee

         whichever is lower

Provision of furnished Accommodation

Perquisite valuation will be in addition to the valuation under "Provision of unfurnished Accommodation".  To the said valuation will be added

1. 10% of the cost of furniture, appliance and equipments or
2. actual cost of rental of these furniture, appliance and equipments

    less any amount paid by the employee

Personal Attendants

Value of services paid by the employer for provision of

1. Sweeper
2. Watchman
3. Gardener

will be treated as perquisite.  Actual cost of payment by the employer will be taken as perquisite less any amount paid by the employee

Gas, Electricity & Water

Actual cost (less any amount paid by the employee) of provision of gas, electricity or water to employee's household consumption will be treated as perquisite

Free or Concessional Education

Cost of free education is a perquisite less any amount paid by the employee.  If the employer runs the educational institution then valuation will be based on cost of education in a similar institution in a nearby locality.

Interest free or concessional loans

Any loan provided by the employer, in excess of Rs.20,000, either at NIL rate of interest or reduced rate of interest then perquisite valuation will be

• Difference in interest rate charged by State Bank of India for similar types of loans and interest payable by the employee.  If for example State Bank of India charges 16% for personal loan and the employer extends to the employee personal loan at 2% interest.  Then perquisite value will be equivalent to 14% of the loan amount

However loan extended for any medical purpose does not get covered under this clause provided the employer does not reimburse the same under any medical insurance scheme

Use of Assets

If any assets of the employer, except computer & laptop, is used by the employee then perquisite valuation will be 10% of the value of these assets less any amount paid by the employee

Transfer of Assets

Any asset of the employer transferred to the employee is a perquisite, the value of perquisite is as follows

1. Motor Car - Original value less Depreciation at the rate of 20% in Written down value method for every completed year of usage less any amount paid by the employee
2. Computer or any other Electronic Gadgets - Original value less Depreciation at the rate of 50% in Written down value method for every completed year of usage less any amount paid by the employee
3. Any other asset - Original value less Depreciation at the rate of 10% in Straight line value method for every completed year of usage less any amount paid by the employee

The above perquisites valuation can change depending on rules prevalent at various times, you are requested to check the same before proceeding for any decisions