New IT Act 2025 — Knowledge Bank

Valuation of perquisites

Rule 15 — Valuation of perquisites

Parent Act Section(s): Section 2, Section 3, Section 17

Full Text

  1. Valuation of perquisites.–(1) For the purpose of computing the income chargeable under the head “Salaries”, the value of perquisites provided by the employer, either directly or indirectly, to the assessee (herein referred to as the employee) or to any member of his household by reason of his employment, shall be determined in accordance with the provisions of this rule. (2) (a) The value of residential accommodation provided by the employer, for the purpose of section 17(1)(a) and (b), during the tax year, in the circumstances referred in column B of the following Table I, shall be determined in accordance with the column C or column D thereof, as the case may be: Table I Sl. Circumstances Where accommodation is Where accommodation is No. unfurnished furnished A B C D (1) Where the accommodation is License fee determined by the Central Value of perquisite is provided by the Central Government Government or any State Government determined as per the or any State Government, to the in respect of accommodation in provisions of sub-rule (2)(e). employees either holding office or accordance with the rules framed by post in connection with the affairs of such Government as reduced by the the Union or of such State. rent actually paid by the employee. (2) Where the accommodation is provided by any other employer and—

(a) where the accommodation is (i) 10% of salary in cities having Value of perquisite is owned by the employer; or population exceeding forty determined as per the lakhs as per 2011 census in provisions of sub-rule (2)(e). respect of the period during which the said accommodation was occupied by the employee during the tax year as reduced by the rent, if any, actually paid by the employee; (ii) 7.5% of salary in cities having population exceeding fifteen lakhs but not exceeding forty lakhs as per 2011 census in respect of the period during which the said accommodation was occupied by the employee during the tax year as reduced by the rent, if any, actually paid by the employee; and (iii) 5% of salary in other areas, in respect of the period during which the said accommodation was occupied by the employee during the tax year as reduced by the rent, if any, actually paid by the employee. (b) where the accommodation is Actual amount of lease rental paid or Value of perquisite is taken on lease or rent by the payable by the employer or 10% of determined as per the employer. salary, in respect of the period during provisions of sub-rule (2)(e). which the said accommodation was occupied by the employee during the tax year, whichever is lower, as reduced by the rent, if any, actually paid by the employee. (3) Where the accommodation is Not applicable. Actual charges paid or payable provided by the employer specified to such hotel or 24% of salary in serial number (1) or (2) in a hotel paid or payable for the tax (except where the employee is year for the period during provided such accommodation for a which such accommodation is period not exceeding in aggregate provided, whichever is lower, fifteen days on his transfer from one as reduced by the rent, if any, place to another). actually paid or payable by the employee. (b) The provisions of this sub-rule shall not apply to any accommodation temporarily provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site, or a dam site or a power generation site or an off-shore site; which — (i) having plinth area not exceeding 1000 square feet, is located not less than eight kilometres away from the local limits of any municipality or a cantonment board; or (ii) is located in a remote area. (c) Where on account of his transfer from one place to another, the employee is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value with reference to Table I for a period not exceeding ninety days and thereafter the value of perquisite shall be charged for both such accommodations as provided in the said Table I.

(d) Where the accommodation is owned or taken on lease or rent by the employer and the same accommodation is continued to be provided to the same employee for more than one tax year, the amount calculated in accordance with Table I:Sl. No. 2(a) or (b) shall not exceed the amount so calculated for the first tax year, as multiplied by the amount which is a ratio of the Cost Inflation Index for the tax year for which the amount is calculated and the Cost Inflation Index for the tax year in which the accommodation was initially provided to the employee. (e) For the purposes of this sub-rule, where the accommodation is furnished;– (i) the value of perquisite as determined under Table I: Sl. Nos. 1 and 2. C be increased by 10% per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment), as reduced by any charges paid or payable for the same by the employee during the tax year; and (ii) if such furniture is hired from a third party, the value of perquisite would be the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the tax year. (f) For the purposes of this sub-rule, where the accommodation is provided by the Central Government or any State Government to an employee, who is serving on deputation with any body or undertaking under the control of such Government,— (i) the employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation; and (ii) the value of perquisite of such an accommodation shall be the amount calculated in accordance with Table 1: Sl. No. 2(a), as if the accommodation is owned by the employer. (g) For the purposes of clause (d); (i) “Cost Inflation Index” means the index as may be notified by the Central Government under section 72(8)(a); (ii) “first tax year” means the tax year 2023-2024, or the tax year in which the accommodation was provided to the employee, whichever is later. (3)(a) The value of perquisite by way of use of motor car to an employee by an employer, in the circumstances as referred in column B of the following Table II, shall be determined in accordance with column C or column D thereof, as the case may be: Table II VALUE OF PERQUISITE PER CALENDAR MONTH Sl. Circumstances Where cubic capacity of Where cubic capacity of engine No. engine does not exceed 1.6 exceeds 1.6 litres litres or the motor car is an electric vehicle A B C D (1) Where the motor car is owned or hired by the employer and— (a) is used wholly and exclusively no value, if the documents no value, if the documents in the performance of his specified in sub-rule (3)(c) specified in sub-rule (3)(c) are official duties; are maintained by the maintained by the employer; employer (b) is used exclusively for the actual amount of expenditure actual amount of expenditure private or personal purposes of incurred by the employer on incurred by the employer on the the employee or any member of the running and maintenance running and maintenance of his household and the running of motor car during the motor car during the relevant tax and maintenance expenses are relevant tax year including year including remuneration, if met or reimbursed by the remuneration, if any, paid by any, paid by the employer to the employer; the employer to the chauffeur chauffeur as increased by the as increased by the amount amount representing normal wear representing normal wear and tear of the motor car and as and tear of the motor car and reduced by an amount charged as reduced by any amount from the employee for such use. charged from the employee for such use. (c) is used partly in the performance of duties and partly for private or personal purposes of his own or any member of his household and— (i) the expenses on ₹ 5000 (plus ₹3000, if ₹ 7000 (plus ₹3000, if chauffeur

maintenance and chauffeur is also provided to is also provided to run the motor running are met or run the motor car by the car by the employer); reimbursed by the employer) employer; (ii) the expenses on running ₹ 2000 (plus ₹ 3000, if ₹ 3000 (plus ₹3000, if chauffeur and maintenance for chauffeur is also provided by is also provided to run the motor private or personal use the employer to run the car by the employer). are fully met by the motor car by the employer). assessee; (2) Where the employee owns a motor car but the actual running and maintenance charges (including remuneration of the chauffeur, if any) are met or reimbursed to him by the employer and— (a) such reimbursement is for the no value, if the documents no value, if the documents use of the vehicle wholly and specified in sub-rule (3)(c) specified in sub-rule (3)(c) are exclusively for official are maintained by the maintained by the employer; purposes; employer (b) such reimbursement is for the the actual amount of the actual amount of expenditure use of the vehicle partly for expenditure incurred by the incurred by the employer as official purposes and partly for employer as reduced by the reduced by the amount specified personal or private purposes of amount specified in Sl. No. in Sl. No. (1)(c)(i) above, if the the employee or any member of (1)(c)(i) above, if the conditions mentioned in sub-rule his household. conditions mentioned in sub- (3)(c) are fulfilled. rule (3)(c) are fulfilled. (3) Where the employee owns any other automotive conveyance but the actual running and maintenance charges are met or reimbursed to him by the employer and (a) such reimbursement is for the no value, if the documents not applicable; use of the vehicle wholly and specified in sub-rule (2)(c) exclusively for official are maintained by the purposes; employer (b) such reimbursement is for the the actual amount of use of vehicle partly for official expenditure incurred by the purposes and partly for employer as reduced by the personal or private purposes of amount of ₹3000 if the the employee. conditions mentioned in sub- rule (3)(c) are fulfilled. (b) Where an employer owns or hires one or more motor cars and allows the employee or any member of his household to use them for the purposes other than wholly and exclusively in the performance of his duties, the value of perquisite shall be the amount calculated as below: (i) for one car, in accordance with Table II: Sl. No. (1)(c)(i) ;and (ii) for other cars, in accordance with Table II: Sl. No. (1)(b). (c) If the employer or employee claims that the motor vehicle is used solely for official duties or that the actual expenses for running and maintaining the employee-owned motor vehicle for official purposes exceed the deductible amounts in Table II: Sl. No. 2(b) or 3(b), he may claim a higher amount for official use and in this case, the value of the perquisite shall be the actual amount of expenses paid or reimbursed by the employer, minus the higher amount attributed to official use of the vehicle provided that the following conditions are fulfilled: — (i) the employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage and the amount of expenditure incurred thereon; and (ii) the employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties. (d) For the purposes of this sub-rule, the normal wear and tear of a motor car shall be taken at 10% per annum of the actual cost of the motor car or cars. (4) The value of benefit provided by the employer to the employee or any member of his household for goods, services or utilities, as referred to in column B of the following Table III, shall be computed in accordance with column C thereof:

Table III Sl. No. Nature of goods, Value of benefit of the goods, services or utilities provided services or utilities A B C

  1. Services of a sweeper, The total amount of salary paid or payable by the employer or any other a gardener, a watchman person on his behalf for such services as reduced by any amount paid by the or a personal attendant. employee for such services. 2 (a) Supply of gas, The amount paid by the employer to the agency supplying the gas, electric electric energy or water energy or water, as reduced by any amount paid by the employee in respect of for the consumption of such services. the employee‘s household by purchasing them from any outside agency. (b) Supply of gas, The amount of the manufacturing cost per unit incurred by the employer, as electric energy or water reduced by any amount paid by the employee in respect of such services. for the consumption of the employee‘s household made from resources owned by the employer, without purchasing them from any outside agency 3 (a) Provision of free or The amount of expenditure incurred by the employer in this regard, as reduced concessional by any amount paid or recovered from the employee on that account. educational facilities for any member of the employee‘s household. (b) Provision of free or Cost of such education in a similar institution in or near the locality, as concessional reduced by any amount paid or recovered from the employee on that account, educational facilities where the cost of such education or value of such benefit per child exceeds for any member of ₹3,000 per month. employee household, where the educational institution is itself maintained and owned by the employer. (c) Provision of free Cost of such education in a similar institution in or near the locality, as educational facilities reduced by any amount paid or recovered from the employee on that account, for any member of where the cost of such education or value of such benefit per child exceeds employees’ household ₹3,000 per month. in any other educational institution by reason of his employment.
  2. Provision by an Value at which such benefit or amenity is offered by such employer to the employer who is public as reduced by the amount, if any, paid by or recovered from the engaged in the carriage employee for such benefit or amenity. of passengers or goods, to any employee (not being an employee of an airline or the railways) or to any member of his household, for personal or private journey free

of cost or at concessional fare, in any conveyance owned, leased or made available by any other arrangement by such employer for the purpose of transport of passengers or goods. (5)(a) In terms of provisions contained in section 17(1)(e), the value of other benefits or amenities of the nature referred to in Column B of the following Table IV shall be determined in accordance with column C and subject to conditions provided in Column D thereof: Table IV Sl. Nature of other Value of Conditions No. benefits or perquisite amenities A B C D

  1. Benefit from the It shall be the sum (a) No value would be charged if such loans are made available provision of equal to the for medical treatment in respect of diseases specified in rule interest-free or interest computed 18 or where the amount of loans is not exceeding ₹2,00,000 concessional loan at the annual rate in the aggregate; and for any purpose charged by the made available to State Bank of (b)where the benefit relates to the loans made available for the employee or any India, constituted medical treatment referred to in clause (a), the exemption member of his under the State so provided shall not apply to so much of the loan as has household during Bank of India Act, been reimbursed to the employee under any medical the relevant tax year 1955 (23 of 1955), insurance scheme. by the employer or as on the 1st day any person on his of the relevant tax behalf. year in respect of loans by the bank for the same purpose, using the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household.
  2. The value of It shall be the sum (a) Where such facility is maintained by the employer, and is travelling, touring, equal to the not available uniformly to all employees, the value of benefit accommodation and amount of the shall be taken to be the value at which such facilities are any other expenses expenditure offered by other agencies to the public; or paid for or borne or incurred by such (b) where the employee is on official tour and the expenses are reimbursed by the employer in that incurred in respect of any member of his household employer for any behalf. accompanying him, the amount of expenditure so incurred holiday availed of shall be an amenity; or by the employee or (c) where any official tour is extended as a vacation, the value any member of his of such fringe benefit shall be limited to the expenses household, other incurred in relation to such extended period of stay or than concession or vacation as reduced by the amount, if any, paid or recovered assistance referred from the employee for such benefit or amenity. to in rule 277.
  3. The value of free It shall be the This provision shall not apply to

food and non- amount of alcoholic beverages expenditure (a) free food and non-alcoholic beverages provided by such provided by the incurred by such employer during working hours at office or business premises employer to an employer as or through paid vouchers usable only at eating joints, to the employee. reduced by the extent the value thereof in either case does not exceed ₹200 amount, if any, per meal; or paid or recovered (b) tea or snacks provided during working hours; or from the employee (c) free food and non-alcoholic beverages during working for such benefit or hours provided in a remote area or an off-shore installation. amenity. 4. The value of any It shall be the sum It shall be ‗nil‘, if the value of such gift, voucher or token, as gift, or voucher, or equal to the the case may be, is below ₹ 15,000 in aggregate during the token (in lieu of amount of such tax year. gift) received by the gift. employee or by member of his household) on ceremonial occasions or otherwise from the employer. 5. The amount of It shall be the There shall be no value of such benefit, where expenses are expenses including amount taken to incurred wholly and exclusively for official purposes and the membership fees be the value of conditions specified in sub-rule (5)(b) are fulfilled. and annual fees perquisite incurred by the chargeable to tax employee or any as reduced by the member of his amount, if any household, which is paid or recovered charged to a credit from the employee card (including any for such benefit or add-on-card) amenity. provided by the employer, or otherwise, paid for or reimbursed by such employer. 6. The value of benefit It shall be (a) Where the employer has obtained corporate membership of to the employee determined to be the club and the facility is enjoyed by the employee or any resulting from the the actual amount member of his household, the value of perquisite shall not payment or of expenditure include the initial fee paid for acquiring such corporate reimbursement by incurred or membership; and the employer of any reimbursed by (b) the provision given in column C of Sl. No. 6 shall not expenditure incurred such employer on apply, if such expenditure is incurred wholly and exclusively (including the that account and for business purposes and the following conditions are amount of annual or the amount so fulfilled:– periodical fee) in a determined shall (i) conditions in sub-rule (5)(b) are fulfilled; and club by him or by a be reduced by the (ii) use of health club, sports and similar facilities are provided member of his amount, if any uniformly to all employees by the employer. household. paid or recovered from the employee for such benefit or amenity. 7. The value of benefit It shall be to the employee determined at resulting from the 10% per annum use by the employee of the actual cost or any member of of such asset or

his household of any the amount of rent movable asset (other or charge paid or than assets already payable by the specified in this rule employer, as the and other than case may be, as laptops, computers, reduced by the tablets and mobile amount, if any, phones) belonging paid or recovered to the employer or from the employee hired by him. for such use. 8. The value of benefit It shall be The cost of normal wear and tear shall be calculated at the rate to the employee determined to be of arising from the the amount (a) 50% in case of computers and electronic items, by transfer of any representing the reducing balance method; movable asset actual cost of such (b) 20% in the case of motor cars, by reducing balance belonging to the assets to the method; and employer directly or employer as (c) 10% in case of other assets, indirectly to the reduced by the employee or any cost of normal of the cost of the asset for each completed year during which member of his wear and tear and such asset was put to use by the employer. household. as further reduced by the amount, if any, paid or recovered from the employee being the consideration for such transfer. 9. The value of any It shall be other benefit or determined on the amenity, service, basis of cost to the right or privilege employer under an provided by the arm’s length employer, except transaction as expenses on reduced by the telephones, including employee’s a mobile phone. contribution, if any. (b) For the purposes of clause (a) of Table IV: Sl. Nos. 5 and 6 .C, the following conditions need to be satisfied:– (i) complete details in respect of such expenditure are maintained by the employer which may, inter alia, include the date of expenditure and the nature of expenditure; (ii) the employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties. (6) For the purposes of section 17(1)(d), the fair market value of any specified security or sweat equity share, being an equity share in a company, on the date on which the option is exercised by the employee, shall be determined as follows:– (a) in a case where, on the date of the exercising of the option, the share in the company is listed on a recognised stock exchange, the fair market value shall be the average of the opening price and closing price of the share on that date on the said stock exchange, subject to the provisions of clause (b); (b) in a case where, on the date of exercising of the option, the share is listed on more than one recognised stock exchanges, the fair market value shall be the average of the opening price and closing price of the share on the recognised stock exchange which records the highest volume of trading in the share; (c) in a case where, on the date of exercising of the option, there is no trading in the share on any recognized stock exchange, the fair market value shall be— (i) the closing price of the share on any recognised stock exchange on a date closest to the date of exercising of the option and immediately preceding such date; or (ii) the closing price of the share on a recognised stock exchange, which records the highest volume of trading in such share, if the closing price, as on the date closest to the date of exercising

of the option and immediately preceding such date, is recorded on more than one recognised stock exchange; (d) in a case where, on the date of exercising of the option, the share in the company is not listed on a recognised stock exchange, the fair market value shall be such value of the share in the company as determined by a merchant banker on the specified date. (7) For the purposes of section 17(1)(d), the fair market value of any specified security, not being an equity share in a company, on the date on which the option is exercised by the employee, shall be such value as may be determined by a merchant banker on the specified date. (8) For the purposes of this rule— (a) “accommodation” includes a house, flat, farm house or part thereof, or accommodation in a hotel, motel, service apartment, guest house, caravan, mobile home, ship or other floating structure; (b) “closing price” of a share on a recognised stock exchange on a date shall be the price of the last settlement on such date on such stock exchange, and where the stock exchange quotes both “buy” and “sell” prices, the closing price shall be the “sell” price of the last settlement; (c) “entertainment” includes hospitality of any kind and also, expenditure on business gifts other than free samples of the employer‘s own product with the aim of advertising to the general public; (d) “hotel” includes licensed accommodation in the nature of motel, service apartment or guest house; (e) “maximum outstanding monthly balance” means the aggregate outstanding balance for each loan as on the last day of each month. (f) “member of household” shall include— (i) spouse; (ii) children and their spouses; (iii) parents; and (iv) servants and dependants; (g) “merchant banker” means category I merchant banker registered with Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992); (h) “opening price” of a share on a recognised stock exchange on a date shall be the price of the first settlement on such date on such stock exchange and where the stock exchange quotes both “buy” and “sell” prices, the opening price shall be the “sell” price of the first settlement; (i) “recognised stock exchange” shall have the same meaning assigned to it in section 2(f) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); (j) “remote area”, specified in sub-rule (1)(b), means any area other than an area which is located— (i) within the local limits of; or (ii) within a distance, measured aerially, of thirty kilometers from the local limits of, any municipality or a cantonment board having a population of one lakh or more based on the 2011 census; (k) “salary” includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called, from one or more employers, as the case may be, but does not include the following:— (i) dearness allowance or dearness pay, unless it enters into the computation of superannuation or retirement benefits of the employee concerned; (ii) employer’s contribution to the provident fund account of the employee; (iii) allowances, which are exempted from payment of tax; (iv) the value of perquisites specified in section 17(1); (v) any payment or expenditure specifically excluded under section 17(2); and (vi) lump-sum payments received at the time of termination of service or superannuation or voluntary retirement, like gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and similar payments; (l) “specified date” means— (i) the date of exercising of the option; or (ii) any date earlier than the date of the exercising of the option, not being a date which is more than one hundred and eighty days earlier than the date of the exercising.

Cross-References

Act Sections Referenced

  • Section 2
  • Section 3
  • Section 17
  • Section 72

Practical Notes

[To be populated — interpretive notes, circular references, case law pointers]

Graph View

Backlinks