Last week, we had discussed how you can use exemptions on allowances such as house rent and conveyance to reduce your tax liability. In addition to these, you can avail yourself of many tax-free perks.
Perquisites (perks) include all benefits provided by an employer to an employee such as accommodation, car and education. These are generally provisions for various facilities rather than allowance for expenses. Some of the perks that are exempt to the prescribed extent are as follows:
■ Reimbursement of medical expenses up to Rs 15,000 per annum for you and your family is tax-exempt. However, if an employee suffers injury during service and the employer reimburses the medical expenses, such a reimbursement is not a perk as it is the responsibility of the employer to provide such expenses.
■ Refreshment (tea, coffee, snacks etc.) provided by an employer during working hours in office.
■ Free meal provided during working hours or through paid non-transferable vouchers (to be used only at eating joints), if the value in either case does not exceed Rs 50 per meal.
Free meals provided during working hours in a remote area or an offshore installation are also tax-exempt without any monetary limit.
■ Amount spent on training of employees or fees paid for refresher management course.
■ Goods manufactured by employer sold to its employees at concessional rates.
n Perquisites allowed outside India by the government to a citizen of India for rendering services abroad.
■ Employer’s contribution to staff group insurance scheme.
■ Payment of annual premium by employer on personal accident policy
■ Medical insurance payments under approved scheme, whether paid directly or reimbursed to employees
■ Re-imbursement of expenses on a car (which is owned by the employee and used for personal and official purpose).
Expenses up to Rs 1,800 per month for small cars and Rs 2,400 per month for other cars are not taxable. Besides, expenses up to Rs 900 per month for a driver are also tax-exempt.
■ Free educational facility in an institute owned/maintained by the employer for the children of the employee, provided the cost is up to Rs 1,000 per month per child. There is no limit on the number of children.
■ Interest-free/concessional loan for an amount not more than Rs 20,000.
■ Gifts up to Rs 5,000 in aggregate per annum. If the gift amount exceeds Rs 5,000, the full amount shall be considered as income.
■ Computer/laptop given (not transferred) to an employee for official/personal use.
■ Free transfer of movable assets (other than computer, electronic items and car) by the employer after using it for 10 years or more.
■ Accommodation on transfer of an employee in hotels up to 15 days in aggregate.
■ Accommodation in a “remote area” and other specified areas
■ Interest-free loan for medical treatment of specified nature
■ Initial fees paid by employer for acquiring corporate membership of a club.
■ Use of health club, sports or similar facility provided uniformly to all employees.
■ Periodicals and journals required for work.
■ Conveyance facility to cover the journey between office and residence.
■ Free or concessional allotment of shares, debentures or warrants under the Esop Scheme
■ Income tax on perquisites-in-kind paid by the employer.
■ Telephone charges or mobile bills paid by the employer
■ Rent-free official residence provided to a judge of a high court or Supreme Court and to officials of Parliament, Union ministers or leader of Opposition in Parliament.
■ Conveyance facility to high court and Supreme Court judges
Health & happiness
Besides reimbursement of medical expenses up to Rs 15,000 per annum, the following medical facilities provided by an employer are exempt from tax.
● Cost of treatment for employee or a member of his family in a hospital maintained by the employer.
● Reimbursement of expenditure actually incurred by employee on his medical treatment or of any member of his family (a) in a hospital maintained by the government or any local authority or other hospital approved by the government, and (b) in respect of the prescribed diseases in a hospital approved by the CCIT. The employee will have to attach with his IT return certificate from hospitals specifying the disease and the receipt for amount paid;
● Any portion of the premium paid by or reimbursed by the employer on employee’s health insurance scheme approved under Section 36(1) or Section 80D;
● In the case of treatment abroad, expenditure incurred by an employer, subject to certain conditions, and reimbursement by the employer of expenditure actually incurred by an employee for treatment abroad.
In the above cases, “hospital” includes dispensary or a clinic or nursing home, while “family” refers to the spouse and children of the individual; parents, brothers and sisters of the individual or any of them wholly or mainly dependent.
The following perks are taxed if the salary, excluding non-monetary benefit, exceeds Rs 50,000 per annum, or the employee is a director or has substantial interest in company :
■ Motor car provided by employer at concessional rate or for free
■ Gas, electricity, water provided by employer
■ Free education to children
■ Free transport facility
■ Domestic servants provided by the employer
Some perks such as rent-free or concessional accommodation, life insurance premium, interest-free or concessional loan, transfer or use of assets (other than laptop/ computer), any benefit or amenity or service are taxable in all cases but their values are determined according to the guidelines.
So, you can just sit back and enjoy your perks as most of them don’t add to your tax burden.
The author is a tax advocate