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How to Invest in SIP A Beginner's Guide
In summary
Perquisites are benefits or amenities provided by an employer to an employee in addition to regular salary or wages.
- Perquisites can be provided in cash, kind, or as benefits and amenities.
- Rent-free accommodation, employer-provided cars, and concessional loans are common examples.
- Taxable perquisites are valued using prescribed valuation rules.
- Some perquisites may be partly or fully exempt when specified conditions are met.
- Taxable perquisites can increase the salary income considered for Income Tax purposes.
- The tax treatment depends on the nature of the benefit and applicable conditions.
Understanding perquisites can help you review your salary records and identify benefits that may need to be considered when calculating taxable income.
What are perquisites in Income Tax?
Perquisites in Income Tax are benefits or amenities provided by an employer to an employee in addition to salary or wages. They can be monetary or non-monetary and may be provided free of cost or at a concessional rate.
Common examples include rent-free accommodation, company cars, concessional loans, domestic services, and certain educational or recreational facilities.
The taxable value of a perquisite is determined according to the applicable valuation rules. Where a benefit is taxable, its prescribed value is generally considered as part of salary income.
What are common perquisites in salary?
Several benefits provided by an employer can qualify as perquisites, depending on the applicable conditions.
Accommodation and transport
Rent-free or concessional accommodation provided by an employer can be treated as a taxable benefit. A company car provided for personal use can also qualify as a perquisite, with its valuation depending on the applicable rules and circumstances of use.
Loans and domestic services
Interest-free or concessional loans provided by an employer may be treated as perquisites. Similarly, domestic services such as a driver or gardener provided by the employer may have a taxable value.
Meals, insurance, and club facilities
Free or subsidised meals, employer-paid insurance, and club memberships may also qualify as perquisites. Their tax treatment depends on the nature of the benefit and the conditions prescribed under the applicable rules.
Educational facilities
Educational facilities provided by an employer for an employee or their children may be treated as perquisites, subject to the applicable valuation provisions.
What are the types of perquisites?
Perquisites can be classified according to their tax treatment and form.
Taxable perquisites
Taxable perquisites are benefits whose prescribed value is included in taxable salary. Examples can include certain accommodation, employer-provided cars for personal use, and concessional loans.
Partially taxable perquisites
Some benefits may be taxable only to the extent specified under the applicable rules. The treatment depends on the benefit, its value, and the conditions that apply.
Tax-exempt perquisites
Certain employer-provided benefits may have nil taxable value when the prescribed conditions are satisfied.
Monetary and non-monetary perquisites
Monetary perquisites have a monetary component, while non-monetary perquisites are provided as benefits or facilities, such as accommodation or use of an asset.
How are perquisites valued?
The taxable value of a perquisite is determined using the valuation rules applicable to that particular benefit. It may differ from the actual cost incurred by the employer.
| Perquisite | General valuation approach |
|---|---|
| Rent-free accommodation | Based on the applicable prescribed valuation method |
| Furnished accommodation | Includes the applicable value of furniture |
| Employer-provided car | Depends on use and applicable valuation rules |
| Concessional loan | Based on the prescribed valuation method |
| Education facility | Based on the applicable prescribed value |
| Domestic services | Based on the applicable prescribed value or cost |
| Club membership | Depends on the nature and use of the facility |
| Meals | Subject to applicable limits and conditions |
| Employer-paid insurance | Depends on the nature of the policy and applicable rules |
| Movable assets | Valued according to the prescribed rules |
Last updated: September 2026
The valuation method can differ between perquisites, so a single method should not be applied to every employee benefit.
Which perquisites may be exempt?
Some benefits may be exempt or have nil taxable value when the prescribed conditions are satisfied.
- Medical facilities may receive specific tax treatment when the applicable conditions are met.
- Laptops or computers provided for official use may qualify for exemption under applicable rules.
- Telephone or internet facilities used for official purposes may receive specific treatment.
- Training or skill-development expenses borne by the employer may be exempt.
- Recreational facilities provided uniformly to employees may receive specific treatment.
- Certain relocation expenses may qualify for exemption when the prescribed conditions are met.
An exemption should not be assumed merely because an expense is work-related. The specific conditions applicable to the benefit should be checked.
How do perquisites affect taxable salary?
A taxable perquisite can increase the salary income considered for Income Tax purposes.
For example, suppose an employee receives a salary of Rs. 8,00,000 and taxable perquisites valued at Rs. 1,00,000. Before considering deductions, exemptions, or other adjustments, the relevant salary income would include Rs. 9,00,000.
The actual Income Tax liability would depend on the employee's total income and the provisions applicable for the relevant financial year.
How do you calculate tax on perquisites?
You can understand the calculation by following these steps:
- Identify the benefits: List the benefits and amenities provided by your employer.
- Determine taxability: Check whether each benefit is taxable, partly taxable, or exempt.
- Calculate the value: Apply the prescribed valuation method to taxable benefits.
- Add taxable perquisites: Include the applicable value in the relevant salary income.
- Calculate Income Tax: Apply the provisions and tax rates applicable to your circumstances.
The final tax liability can vary based on total income, deductions, exemptions, and other applicable provisions.
What is the difference between allowances and perquisites?
Allowances and perquisites are different components of employee compensation.
| Basis | Allowance | Perquisites |
|---|---|---|
| Meaning | Monetary amount paid to an employee | Benefit or amenity provided in addition to salary |
| Form | Usually monetary | Monetary or non-monetary |
| Purpose | Often intended to meet a specific expense | Provides an additional benefit or facility |
| Example | House Rent Allowance or travel allowance | Rent-free accommodation or company car |
| Tax treatment | Depends on the allowance and applicable conditions | Depends on the benefit and applicable valuation rules |
Last updated: September 2026
The two should not be treated as interchangeable because different Income Tax provisions can apply to each.
How do perquisites relate to other Income Tax topics?
Perquisites are part of salary-related taxation. They are separate from capital gains, updated returns, and presumptive taxation provisions.
If you want to understand the tax treatment of eligible long-term capital gains, read Long Term Capital Gain Tax.
If you need information about filing an updated Income Tax return, Section 139 (8A) of the Income Tax Act covers the relevant provision.
For eligible short-term capital gains, Short Term Capital Gains Tax explains the applicable tax treatment.
Business owners using presumptive taxation can refer to Section 44ad of Income Tax to understand the provision and its applicability.
What should you check when reviewing perquisites?
Review the benefits shown in your salary records and check how each taxable benefit has been valued.
- Identify the benefit: Check the benefit or facility provided by your employer.
- Check taxability: Determine whether it is taxable, partly taxable, or exempt.
- Check valuation: Review the method used to determine its taxable value.
- Check employee contributions: Confirm whether amounts paid by you have been considered where applicable.
- Review salary records: Check whether the taxable value has been reflected correctly.
If you believe a perquisite has been valued incorrectly, discuss the calculation with your employer's payroll or tax team.
Conclusion
Perquisites are benefits or amenities provided by an employer in addition to salary. Accommodation, employer-provided cars, concessional loans, domestic services, and certain facilities are common examples.
The tax treatment depends on the type of benefit, applicable valuation rules, and conditions for any exemption. Reviewing your salary records and the treatment of perquisites can help you understand how these benefits affect taxable income.
Last reviewed: September 2026
Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.
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Frequently Asked Questions
Perquisite tax treatment
Salary and Income Tax
Are all perquisites taxable?
No. Some perquisites are taxable, while others may be partly or fully exempt when specified conditions are satisfied. The treatment depends on the nature of the benefit and applicable rules.
Is a company car a taxable perquisite?
It can be. The tax treatment depends on factors such as personal or official use, who bears running expenses, and the applicable valuation rules.
Does a taxable perquisite increase taxable salary?
Generally, the prescribed taxable value of a taxable perquisite is included in salary income. The final Income Tax liability depends on the employee's complete income and applicable provisions.
Can an employer-provided loan be a taxable perquisite?
Yes. An interest-free or concessional loan can be taxable as a perquisite, subject to applicable valuation rules and specified exceptions.
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