Club expenditure as a Perquisite
It has become common in today that employer get their employees registered in clubs and pay their membership fees. The reason may be professional i.e. for the benefit of his organisation or it may be for individual benefit of employee. Such amount shall be taxable in hands of the employee as a salary perquisite. Detail study of taxability of such expenditure is done below.
The value of benefit to the employee is not only as a result from the payment of the expenditure but also by way of reimbursement by the employer of any expenditure incurred. The expenditure we are referring here includes the amount of annual or periodical fee in a club. Also, it is not necessary that the amount is incurred only on employee; the perquisite value shall include the expenditure on a member of his household of the employee.
The taxable perquisite shall be determined to be the actual amount of expenditure incurred or reimbursed by such employer on that account reduced by the amount paid or recovered from the employee for such benefit or amenity (if any).
However, in a case where the employer has obtained corporate membership of the club and the facility is enjoyed by the employee or any member of his household, the value of perquisite shall not include the initial fee paid for acquiring such corporate membership.
Further, if such expenditure is incurred wholly and exclusively for business purposes, it would not be treated as a perquisite provided the following conditions are fulfilled:-
- complete details in respect of such expenditure are maintained by the employer which may among other things include the date of expenditure, the nature of expenditure and its business expediency;
- the employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.
Carefully note that, the perquisite value shall be need for use of health club, sports and similar facilities if the same is provided uniformly to all employees by the employer.
