Income Tax Return Filing: ALERT! Got perks in salary from office? Here’s how they are taxed – Check Details
income tax: Paying income tax is an obligation for both working individuals and entities, requiring them to contribute a certain portion of their earnings to the government. Working individuals, however, receive additional perks from their employers, in addition to usual reimbursements for necessary expenses. These perks, whether in cash, kind, or both, are known as perquisites. Perquisites refer to the extra benefits employees receive from their employers, beyond their salary, and form part of the overall pay structure and the CTC (total cost to the company).
What are Perquisites under the Income Tax Act 1961
According to the Section 17(2) of the Income Tax 1961, the term ‘perquisite’ includes; The value of rent-free accommodation provided to the assessee by his employer 82[computed in such manner as may be prescribed] as well as the value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer. It does not, however, cover mere reimbursement of necessary disbursements.
What are Taxable Perquisites
Perquisites could be taxable or non-taxable, according to the Income Tax Act. According to the Income Tax Act, the taxable perquisites include a Dearness Allowance, Entertainment Allowance, Overtime Allowance, City Compensatory Allowance, Interim Allowance, Project Allowance, Tiffin/Meals Allowance, Cash Allowance, Non-Practicing Allowance, Warden Allowance, Servant Allowance, and Fixed Medical Allowance
The government employes are, however, employees can claim exemption from the entertainment allowance in the manner provided in section 16 (ii).
How Perquisites are taxed
In India, the taxability of perquisites is determined as an average of income tax that is calculated based on the rate of tax for the given fiscal year, the income charged under salaries, and the value of perquisites for the amount of tax paid by the employer.