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Perquisites

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  • 1.  
  • 2. Perquisites
    • Casual emolument or benefit attached to an office or position in addition to salary or wages
    • Something that benefits a man by going into his own pocket
    • Need not be only in kind. It can be in cash.
  • 3. Conditions To become perquisites
    • Allowed by Employer to Employee
    • Allowed during Continuance Of employment
    • Directly Depend upon service
    • Personal advantage To the employee
    • Derived by Virtue of Employer’s authority
  • 4. Other conditions
    • Employer and employee relationship should exist at any point of time- need not be an employee now.
    • Legal origin is important- Un authorized advantage taken by employee without employer’s authority will not become perquisites.
  • 5. Perquisites Includes
    • Rent free Accommodation Provided By employer ( Accommodation Related perquisites (1-3) including sweeper, gardener, watchman, gas, electricity, etc)
    • 2. Concessional Accommodation Provided By employer
    • 3. Value of Benefits provided like furniture in the accommodation
    • 4. Personal Obligations of Employee Met by employer
    • 5. Funds paid by employer other than RPF/Insurance fund
    • 6. Fringe Benefits Allowed To employees of organisation other Than companies
  • 6. Perquisites Taxable in the hands of employee In the hands of employee Category-A Category –B
    • R ent free or concessional rent accommodation
    • S weeper in the house, gardener, watchman, personal attendant
    • 3. Free/concessional g as, electricity, water etc
    • E ducational facility to employee’s family members including servants and dependent, parents, spouse and children(need not be dependent)
    • L eave travel concession beyond 2 travels in a block period
    • Short form (RSGEL)
    1.Car given by employer 2. Transport facility given by transport undertakings except Railway and airlines. ( only to Specified Employee) 1 to 5 taxable only to Specified Employee
  • 7.
    • Special items in computation of perquisites
  • 8. Rent Free accommodation(RFA)
    • Company’s House given at free of cost or rented by company given to employee at free/concessional rent.
    • Includes: house, flat, farm house, carvan, mobile home, ship, floating structure-like boat.
    • Step1. Unfurnished Accommodation
    Central or State Government employees Private employees
  • 9. 1.Central or state government employee-RFA
    • License fee of flat determined by central government is perquisites in the hands of employee.
    • Fair market value of rent is not important
  • 10. RFA-Government employee
    • Exercise:- Mr. X is working in Central government service given rent free accommodation in an government apartment at free of cost. The license fee prescribed by government is Rs.3000 but fair rental value of the house is Rs. 10,000. How much is taxable?
    • Answer :- Fair rent is not considered. The license fee Rs. 3,000 is taxable in the hands of Specified employee.
  • 11. 2. Private Employees(RFA)
    • Value of perquisites depends on Population of the city where accommodation provided.
    Exceeding population 25 lakhs Population beyond 10 lakhs-Up to25 lakhs Population Up to 10 lakhs Owned By employer 15% salary or amount paid By company To outsider Which ever Is less Rented By company Owned By employer Rented Owned By employer Rented By company 15% of salary 10% of salary 7.5% of Salary Population as per 2001 census
  • 12. Explanation to the diagram
    • If house property is owned by employer depends on the population of the city percentage differs. Big city it is 15% of salary, medium city it is 10% and small city it is 7.5% of salary for accommodation with out any facility like furniture.
    • If house is rented by employer given to employee it is 15% of salary or rent paid by employer whichever is less taxable for specified employees irrespective of the type of city.
  • 13. If Furniture provided by employer
    • If rented
    • Actual hire charges
    • payable
    If owned 10% of original Cost of furniture
  • 14. Meaning of salary for RFA
    • All Cash salary received or receivable in hand (including taxable allowances) by the employee himself.
    • Excludes all *perquisites and *DA which will not come under retirement purpose
    • If any allowance is exempted (like HRA(partly), children educational allowance up to Rs.100 Per month or transport allowance up to Rs. 800 per month etc.), to the extent exempted is not included in the meaning of salary but balance is included in the meaning of salary.
  • 15. Car (when non-taxable perquisite)
    • Re-imbursement of expenses in respect of car (which is owned by employee and used for personal and official purpose) (amount not taxable is up to Rs. 1,200 per month for car having engine capacity of not more than 1600cc, Rs. 1,600 per month for car of above 1600cc and Rs. 600 per month for driver).
    • Conveyance facility provided to High Court Judges and Supreme Court Judges.
    • Conveyance facility provided to an employee to cover the journey between office and residence.
  • 16. Others…. (non-taxable)
    • Interest-Free Loan
    • Interest-free / concessional loan of an amount not exceeding Rs.20,000
    • Gift-in-kind up to Rs.5,000 in a year.
    • Employer's contribution to staff group insurance scheme.
  • 17. Exercise-RFA
    • Value of rent free accommodation : Preetham is sales manager of a private company and for previous year 2007-08,he received the following emoluments(amts in Rs)
    • Basic Salary 248000
    • Bonus 16000
    • Dearness allowance(50% forming part of salary) 60000
    • Project allowance 15000
    • Commission on sales 16000
    • City compensatory allowance 25000
    • Medical allowance 12000
    • Employer contribution to recognized provision fund 20000
    • Salary pertaining the year 2008-09 has been received in advance 20000
    •  
    • (1) He has been provided with a rent free accommodation in Bangalore owned by the employer. The population of Bangalore may be assumed to be 50 lakhs as per 2001 census
    • Q. Determine the taxable value of the perquisite in respect of rent free accommodation.
    •  
  • 18.
    • (2) He has been provided with a rent free accommodation in jaipur owned by the employer. The population of jaipur may be assumed to be 15lakhs as per 2001 census
    • Determine : a) Meaning of salary for RFA
    • b)the taxable value of the perquisite in respect of rent free accommodation.
    • 1. Meaning of salary:-
    • All Cash salary received or receivable in hand including taxable allowances by the employee himself.
    • Excludes all *perquisites and *DA which will not come under retirement purpose
    • Any allowance is not taxed( like HRA(partly), children educational allowance up to Rs.100 Per month or transport allowance up to Rs. 800 per month etc.) are not included in the meaning of salary.
  • 19. Meaning of salary- Exercise
    • The valuation of rent free accommodation shall be 15% of the salary i.e. 15% of (248000+ 16000+30000+15000+16000+25000+12000)=Rs 54,300
    • Note: Salary shall be taken on basis for the period for which accommodation has been provided. Hence advance salary for 2008-09 shall not be taken in account.
    • Employer’s contribution does not come to the assessee in cash as it is paid directly to the department. That is why I have mentioned the meaning of salary is cash salary received by the assessee himself.  
  • 20. Exercise
    • Value of free rent accommodation : sri Mohan is purchase manager of a private company and for previous year 2007-08 he received the following emoluments-
    •  
    • Basic Salary 120000
    • Bonus 16000
    • Dearness allowance(50% forming part of salary) 60000
    • Project allowance 15000
    • Commission on purchase 16000
    • City compensatory allowance 25000
    • Medical allowance 12000
    • Employer contribution to recognized provision fund 20000
    • Salary pertaining the year 2008-09 has been received in advance 20000
    •  
    • He is also in part employment with B ltd and is receiving salary of Rs 80000 P.A. he has been provided with a rent free accommodation in Mysore owned by the employer. The population of Mysore may be assumed to be 15 lakhs as per 2001 census. Determine taxable salary
  • 21. solution
    • Computation of taxable salary of Sri Mohan for assessment Year 2008-09
    •  
    • Basic Salary 120000
    • Bonus 16000
    • Dearness allowance(50% forming part of salary) 60000
    • Project allowance 15000
    • Commission on purchase 16000
    • City compensatory allowance 25000
    • Medical allowance 12000
    • Employer contribution to RPF in excess of 12% of salary 2000
    • [20000- 12% of (120000+ 50% of 60000)]
    • Salary from B ltd 80000
    • Advance of salary 20000
    • Value of housing facility[10% of (120000+16000+30000+ 31400
    • 15000+16000+25000+12000+80000)]
    •  
    • Taxable Salary 397400
  • 22. Exercise
    • Value of concessional accommodation: Sri Basant is purchase manager of a private company and for the previous 2007-08 he received the following emoluments-
    • Basic Salary 240000
    • Bonus 32000
    • Dearness allowance(50% forming part of salary) 120000
    • Project allowance 30000
    • Commission on purchase 32000
    • City compensatory allowance 50000
    • Medical allowance 24000
    • Employer contribution to recognized provision fund 40000
    • 2 months salary for year 2008-09 has been received in advance 20000
    •  
    • What would be the value of accommodation if the employer charges rent of Rs 2000 p.m. in the following independent cases:
    • (a)    The accommodation is provided in Hyderabad where popln as per 2001 census exceeds 25 lakh
    • (b)    The accommodation is provided in Alwar where popln as per 2001 census exceeds 18 lakh
    • (c)   The accommodation is provided at Tumkore (popln less than 10 lakhs)
  • 23. Solution
    • Soln: The valuation of accommodation provided at concessional rent shall be as under-
    • Place of accommodation Value of perquisite
    • Hyderabad 15% of salary less rent recovered = Rs 70200-24000=Rs46200
    • Alwar 10% of salary less rent recovered = Rs 46800-24000=Rs22800
    • Tumkore 7.5% of salary less rent recovered =Rs 35100-24000=Rs11100
    •  
    • Salary = 240000+32000+60000+32000+30000+50000+24000 = Rs 468000
    •  
    • Any rent collected by employer from employee, such amount is deductible from taxable perquisite.
  • 24. Furnished accommodation in hotel
    • 24% of salary paid or payable only for the period accommodation provided
    • Or
    • Actual charges paid or payable by the employer to such hotel
    • Whichever is lower
    • Exceptions:-1. The above rule is not applicable if such employee stays less than 15 days in the previous year and
    • 2.Accommodation given only he is transferred to such new place
    • Both the conditions should be fulfilled
    • Note:-Any amount collected from employee is deductible from such calculations
  • 25. Perquisites –Domestic servants, free supply of gas, electricity etc
    • Sweeper, gardener watchman personal assistant paid by employer is perquisites to the extent of cost to the employer.
  • 26. Monthly Fixed Education allowance
    • Training of employees is not perquisites
    • Fixed educational allowance Rs.100 per child per month is exempted per child. Maximum two children. Beyond is taxable
    • Hostel Rs.300 per month per child exempted. Maximum two children. Beyond it is taxable to the employee
  • 27. Payment of school fees and re-imbursement of school fees
    • Taxable as perquisites fully
  • 28. Education facility to children(own) in their own school or any other school/college
    • If less than Rs. 1000 per month exempted
    • If exceeds Rs. 1000 per month
    • cost of education in similar institution in the near locality (minus )Rs. 1000(minus) amount recovered.
    • Example:- Employer pays Rs. 1500 per month to the school selected by employee for three children and one grand children. How much is taxable perquisites?
  • 29. Education facility to relative’s children
    • Cost to the employer in such similar institution minus amount recovered
    • Important Note: Only for own children exemption of Rs. 1000 allowed. But for the relative’s children such deduction is not allowed.

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