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On reaching a certain position or joining a company, you may come under the umbrella of ushering benefits from the employer. It is not necessary that you will be getting the benefit in each and every case but that solely depends on the policy of the company and ease of employing. Such casual emoluments have been termed as Perquisites under the Income Tax Act. These can be direct or in an indirect manner and are chargeable under the salary head. Therefore, be sure which perquisite will cost you what amount as an employee. Though employer is bearing the cost of providing such expenses, its taxable portion will weigh on you. The benefit can be in the form of reduced prices or can be cost free. It is added to the salary as it is considered the form of income in the hands of the employee.
� Here are few general reimbursements that are provided by the employer but taxed in the hands of the employee:
Residential accommodation:
Employees, as you are aware, are divided into two categories. One is the Central or State Government employee while the other is Private employee. In the case of former, the value of benefits is the amount of license fees that is decided by the government. This is deducted from the rent actually paid by the employees.
� In case of the latter, the value of perquisite is 15% in cities where the population is more than 25 lakhs.
� The perquisite value is 10% in case the value is more than 10 lakhs but less than 25 lakhs and in other cases it is 7.5% of the employee’s salary. In case of lease or rent by the employer, the value will be determined by actual rent or 15% of an employee’s salary, whichever is less. So in simple words, these percentages will add further in your salary under the income head to calculate the tax.
Gift vouchers, token:
You might have heard of some gift vouchers or passes or household item vouchers and tokens provided by the employer and redeemed by the employee. In all such cases, the amount of benefit is the sum of any such voucher. There is also a catch in this, if you ask your employer to give total gift vouchers of less than Rs 5000 in a year, then the value of perquisite is treated as Nil. It thereby means that only the employer will incur the cost of issuing such voucher, in the employee’s hands it will be NIL. The employer is anyway encountering the cost but you can save yourself from taxes if you are proactive.
Food Coupons:
Sometimes, vouchers can be in the form of food and beverages. In this case, if the employee had to pay a certain amount from his own pocket, that will be deducted from the total cost incurred by the employer. However, if � these food coupons are for use in working hours in office premises and cannot be utilized in other eating joints up to a value of Rs 50 per meal, or a free tea, snacks and non alcoholic beverages during working hours, then these are exempt from the purview of income tax.
Educational benefits:
Certain employers these days are also running their own schools or provide concessional or free facilities for children of employees in other schools. In this case, benefits will be the fees charged by similar institution and as applicable in other activities, if something is charged from the employee as an amount of fees, that will get deducted from the benefits. In case the employer provides free education and similar facilities are provided in other schools as well, the cost of education is free up to Rs 1000 per month or 12000 per year per child.
Exemptions In Benefits:
Not all the benefits are taxable, as explained earlier, there are exemptions available and some can be easily sorted by the employee. There are certain more exclusions up to a limit from Income Tax. In case of medical treatment of the employee in a hospital either maintained or approved by employers and in case of government employee it is government or prescribed hospitals, sum up to Rs 15000 from the employer is exempt from taxes.
Similarly, in case of interest free or concessional loan for treatment of employee or member of his household in certain specified diseases for a sum of not more than Rs 20000 paid by employer, no perquisite is taxable in the hands of the employee. Mobile charges and telephone charges incurred by employees on behalf of the employer are also exempt from the income tax.
Planning the break up of salary
at the time of joining any organization is very important. Benefits are always welcome but be prepared for taxes and keep your saving cycle moving so that you are not troubled at the time of tax payments.
