In taxing of perquisites, valuation is the tricky part

Taxation of perquisites has come a long way from 2009, when it was introduced. As a result, for employees, it has become more complicated.

When the guidelines for taxation on perquisites were announced, the Finance Ministry had considered only employer-provided house and vehicle (car). While these two perquisites are the most common, there are others, too.

For instance, if the employer provides gas, electricity or water according to the value charged by the supplying agency or the manufacturing cost, the valuation is quite simple. However, if the supply is from the company's own resources, at say, a discounted rate, tax authorities will have to attach some value to ascertain the liability. Same is the case if you have benefits of domestic help, watchman and so on, as there are no bills available.

Here are some other perquisites:

Concessional educational facility: If the value of benefit per child is less than Rs 1,000 a month, the value would be zero in case of an employer-owned education institution (or the cost incurred by the employer towards the institution).

Concessional loans: Here, the value shall be the interest payable at the prescribed rate. The prescribed rate would be the rate charged by the State Bank of India on the first day of the year preceding that financial year for similar loans. It is calculated on the maximum outstanding monthly balance. However, loans up to Rs 20,000 for medical treatment are exempt, provided these are not reimbursed under medical insurance.

Free meals: The perquisite value for free food and non-alcoholic beverages from the employer shall be the expenditure incurred, reduced by the amount paid or recovered by the employee. "However, no perquisite value will be taken if food and non-alcoholic beverages are provided during working hours and certain conditions specified under Rule 3(7)(iii) are satisfied," said an HR executive of a private firm.

Employer-provided credit card: Says Taxguru.in, "The perquisite value in respect of the expenses incurred by the employee or any of his household members, which are charged to a credit card provided by the employer, not liable to pay fringe benefit tax, which are paid or reimbursed by such employer to an employee shall be taken to be such amount paid or reimbursed by the employer. However, no perquisite value will be taken if the expenses are incurred wholly and exclusively for official purposes and certain conditions mentioned in Rule 3(7)(v) are satisfied."

Club membership: The value shall be taken to be the amount incurred or refunded to an employee or any of his family member by the employer, not liable to pay fringe benefit tax. However, no perquisite value is taken if the expenditure is incurred for business purposes and certain conditions mentioned in Rule 3(7)(vi) are satisfied.

Gift/voucher: The value is taken in lieu of which such gift may be received by an employee or a member of his household from the employer, not liable to pay fringe benefit tax. This shall be the price of the gift/voucher. However, no perquisite value will be taken if the value is below Rs 5,000 in total during the previous years.

The value of any other benefit provided by the employer shall be determined on the basis of the cost to the employer under an arm's length transaction as reduced by the employee's contribution. However, a payment received from the employee towards the above would be reduced from the sum.