Cbdt Relaxes Rules For Valuation Of Perquisites

The Central Board of Direct Taxes (CBDT) has considerably liberalised the rules for valuation of perquisites on the basis of response and suggestions from various quarters on the draft rules.

Rules for reimbursement of expenses in respect of employee-owned cars have been modified to allow deduction of Rs 1,200 or Rs 1,600, depending on the engine capacity, for official use of vehicles. However, where the employer or the employee can provide documents to justify that higher amount had been spent for official use of the vehicle, the perquisite value could be adjusted accordingly, provided that necessary documents in this regard were maintained.

 

The final rules also provide that where prescribed documents were maintained for the official use of entertainment expenses in clubs or through credit cards, no perk value would be computed to that extent.

According to an official release, in the final rules the value of free/concessional residential accommodation provided by the employer would be limited to 10 per cent of salary for cities having population exceeding 4 lakh as per the 1991 census, and to 7.5 per cent of salary for other cities. Officials said that lower limit has been introduced for smaller cities as rentals were lower in the smaller cities.

The release said that while the new rules would come into force with effect from April 1, 2001, an option has been provided to compute the value of all perquisites made available between the period April 1, 2001 to September 30, 2001, in accordance with the pre-amended rules. Officials said this has been done to avoid litigation.

It said that while the amount of perquisite value for part and personal use of employer-owned cars remained the same as notified in the draft rules (Rs 400 for small and Rs 600 for large car), a large car will now be one with engine capacity above 1.6 ltrs those up to 1.6 ltrs capacity would be considered as small cars. The draft rules had specified below 1.88 ltrs engine capacity cars as small cars and above 1.88 ltrs as large car.

Further, the exemption limit of Rs 500 per month per child on education provided in the draft rules has been enhanced to Rs 1000.

The prescribed interest rates on concessional loans would now be 10 per cent per annum for housing and conveyance loans, and 13 per cent for other loans. The draft rules had prescribed four categories of interest rates: 6 per cent for loans to purchase tools, 10 per cent for housing loans, 12 per cent for motor car and scooter loans, and 15 per cent for any other loan.

Under the final rules, no perquisite will be charged for the use of laptops or computers as these were the tools for increasing efficiency. In case of computer and electronic items, the release said that to account for higher utility value and faster obsolescence, the final rules provided that normal wear and tear should would be taken at the rate of 50 per cent, and for cars at the rate of 20 per cent by the reducing balance method for valuation of perks.