VALUATION OF PERQUISITES

Valuation of Perquisites

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VALUATION OF PERQUISITES

Employees play a key role in an organisation. They are responsible part of the team of organisation. A number of perquisites are given to employees in form of concessional food, gifts or reimbursement of expenses.

What shall be the taxability of such perquisites in hands of employee?

Free or concessional food and beverages (non-alcoholic)

  1. The taxable value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. In case any amount is recovered from the employee such amount shall be reduced by the amount of total expenditure.
  2. There are exceptions to this law i.e. the following would not be treated as a perquisite   
    1. free food and non-alcoholic beverages provided by such employer during
      • working hours at office or business premises or
      • through paid vouchers which are not transferable and usable only at eating joints.
    2. tea or snacks provided during working hours   

 

Value of gift, voucher or token in lieu of such gift 

  1. The value of any gift, or voucher, or token received by the employee or by member of family of employee shall be determined as the sum equal to the amount of such gift.      Again the exception to this law is as under:                                                                If the value of such gift, voucher or token, as the case may be, is below Rs. 5,000 in the aggregate during the previous year, the value of perquisite shall be taken as ‘Nil’.

Credit card expenses

  1. The amount of expenses including membership fees and annual fees incurred by the employee or his family member that is charged to a credit card (including any add-on-card) and is reimbursed by employer shall be chargeable to tax. The amount so paid by employer as reduced by the amount recovered from the employee is to be taken as value of perquisite.
  2. Make a note that, if such expenses are incurred wholly and exclusively for purpose of business it would not be treated as a perquisite. The following conditions are to be fulfilled:
    1. The complete details in respect of such expenditure need to be maintained by  the employer. The detail may include the date of expenditure and the nature of expenditure;
    2. 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.

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