Section 17(2) of Income Tax Act

Understanding perquisites under Section 17(2) of Income Tax Act helps employees and employers manage tax implications better. Perquisites are additional benefits provided by employers beyond regular salary. These benefits can significantly impact your tax liability and financial planning.

This article will explain Section 17(2) of Income Tax Act provisions, how perquisites are valued, and their tax treatment. We'll also see how understanding these rules helps in making informed financial decisions.

What is Section 17(2) of Income Tax Act?

Section 17(2) of Income Tax Act defines perquisites as benefits that employees receive from employers in addition to their salary. According to Section 17(2) of Income Tax Act, perquisites include any payment in cash or kind that provides personal advantage to the employee.

The Income Tax Act classifies perquisites into three main categories under Section 17(2):

• Perquisites taxable for all employees
• Perquisites taxable only for specified employees
• Tax-free perquisites

Section 17(2) of Income Tax Act also specifies how these benefits should be valued for taxation purposes. The tax treatment depends on the nature of the perquisite and whether they are provided in cash or kind.

What are the perquisites per Section 17(2) of the Income Tax Act?

Section 17(2) of Income Tax Act lists various benefits that qualify as perquisites. Here's a comprehensive table of perquisites under Section 17(2):

Type of Perquisite	Description	Tax Treatment
Rent-free accommodation	Housing provided by employer	Taxable based on location and salary
Concessional rent accommodation	Housing at reduced rent	Taxable on concessional value
Vehicle facility	Car provided for personal/official use	Taxable based on engine capacity and usage
Interest-free/concessional loans	Loans at zero or reduced interest	Taxable on interest benefit
Medical benefits	Reimbursement of health expenses	Taxable beyond limits
Club memberships	Paid memberships to clubs	Fully taxable
Sweat equity shares	Shares given at concessional rates	Taxable on differential value
Gas/electricity/water supply	Utilities paid by employer	Fully taxable
Education benefits	Payments for education	Partially exempt
Travel and tour benefits	Vacation expenses covered	Taxable with some exemptions

Understanding Section 17(2) of Income Tax Act provisions helps determine which benefits are taxable and how they affect your overall tax liability. Wondering if you qualify for home loan benefits to reduce your tax burden? Check your eligibility with Bajaj Housing Finance Home Loan and find out instantly by entering your mobile number and OTP.

Rules for the valuation of perquisites in income tax

Section 17(2) of Income Tax Act provides detailed rules for valuing different perquisites. These valuation rules ensure fair assessment of the benefit's worth for taxation purposes.

Rent-free accommodation valuation

For government employees, the value is the license fee determined by the government. For non-government employees, Section 17(2) of Income Tax Act prescribes:

• 15% of salary for cities with population above 25 lakh
• 10% of salary for cities with population between 10-25 lakh
• 7.5% of salary for cities with population below 10 lakh

Furnished accommodation value

The value equals the unfurnished accommodation value plus 10% of the furniture cost per annum. If furniture is rented, the actual rent paid by the employer is added to the accommodation value.

Company vehicle valuation

When a company provides a vehicle, Section 17(2) of Income Tax Act values it as:

• With chauffeur and expenses paid by employer: Rs. 1,800 per month for cars up to 1.6L engine and Rs. 2,400 for larger cars
• If employee pays for running expenses: Rs. 600/900 per month depending on engine capacity

Additional Rs. 900 per month if chauffeur is provided

Interest-free loans

The perquisite value is the difference between the interest calculated at prescribed rates and the actual interest paid by the employee.

Need financial assistance for your dream home? Bajaj Finserv offers home loans with minimal documentation and competitive interest rates. You may already be eligible – check your offers now by entering your mobile number and OTP for an instant eligibility check.

What is the taxability of perquisites under Section 17(2) of the Income Tax Act?

Section 17(2) of Income Tax Act categorises perquisites based on their taxability:

Fully taxable perquisites

• Dearness allowance
• Overtime allowance
• City compensatory allowance
• Entertainment allowance (except for government employees)
• Cash allowances
• Servant/warden allowances
• Medical allowances beyond exemption limits
• Non-practicing allowance
• Accommodation provided by the organization

These are taxable regardless of the employee's position or salary level under Section 17(2) of Income Tax Act.

Partially taxable perquisites

• House Rent Allowance (HRA): Exempt to the lowest of:
• Actual HRA received
• 50% of salary for metro cities (40% for non-metros)
• Actual rent paid minus 10% of salary
• Children's education allowance: Rs. 100 per month per child (maximum two children) exempt
• Transport allowance: Rs. 3,200 per month exempt for differently-abled employees

Looking to purchase a new home? Check your loan offers with Bajaj Housing Finance Home Loans starting at just 7.99%*  p.a. You may already be eligible for a loan up to Rs. 15 crore* - enter your mobile number and OTP to find out instantly.

Employees eligible for tax-free perquisites

Section 17(2) of Income Tax Act allows certain perquisites to be tax-free for all employees:

• Medical reimbursement for treatment in government hospitals
• Refreshments provided during working hours
• Recreational facilities (non-transferable and non-convertible)
• Laptops and computers provided for work
• Employer contribution to statutorily recognized provident funds
• Interest-free loans up to Rs. 20,000
• Use of employer's telephone or mobile for official purposes
• Group insurance premium paid by employer

For specified employees, Section 17(2) of Income Tax Act has additional provisions. A specified employee is:

• A director of the company
• An employee with substantial interest (>20% voting power)
• An employee whose income exceeds Rs. 50,000 excluding perquisite value

Tax-free perquisites help employees maximise their take-home benefits without increasing tax liability. Planning to use these tax benefits for homeownership? Bajaj Housing Finance Home Loans offer flexible repayment options. Check your eligibility by entering your mobile number and OTP for an instant eligibility assessment.

Calculation of value of perquisites per Section 17(2)

Calculating the taxable value of perquisites under Section 17(2) of Income Tax Act follows specific rules:

Example 1: Rent-free accommodation

For an employee with monthly salary of Rs. 50,000 in a metro city:

• Annual salary: Rs. 6,00,000
• Value of perquisite: 15% of salary = Rs. 90,000 per annum

Example 2: Company car

For a 1.8L car with driver, all expenses paid by company:

• Monthly perquisite value: Rs. 2,400 + Rs. 900 (driver) = Rs. 3,300
• Annual perquisite value: Rs. 39,600

Example 3: Interest-free loan

For a loan of Rs. 5,00,000 at zero interest when market rate is 10%:

• Interest benefit: Rs. 50,000
• Taxable perquisite value: Rs. 50,000

The amount calculated is added to the employee's income and taxed at applicable slab rates as per Section 17(2) of Income Tax Act.

Want to reduce your tax burden through home loan benefits? Check your eligibility for Bajaj Housing Finance Home Loans with interest rates starting at just 7.99%*  p.a. You may already be eligible for significant tax deductions - enter your mobile number and OTP to discover your options.

Who pays the perquisite taxes?

Under Section 17(2) of Income Tax Act, employees are primarily responsible for paying taxes on perquisites. However, employers must:

• Calculate the perquisite value correctly
• Deduct appropriate TDS (Tax Deducted at Source)
• Include perquisite value in Form 16
• Report details in Form 12BA for high-value perquisites

Employers failing to properly account for perquisites face penalties under Section 17(2) of Income Tax Act. Employees must ensure all perquisites are properly reported in their tax returns.

How Bajaj Finserv Home Loan can help you save tax

While understanding Section 17(2) of Income Tax Act helps manage perquisite taxation, a home loan offers significant tax advantages:

• Interest deduction up to Rs. 2 lakh under Section 24(b)
• Principal repayment deduction up to Rs. 1.5 lakh under Section 80C
• Additional deduction up to Rs. 50,000 for first-time homebuyers under Section 80EEA

Bajaj Finserv offers home loans up to Rs. 15 crore* with interest rates starting from 7.99%*  p.a. With flexible tenures up to 32 years and quick approval in 48 hours*, it's easier than ever to own your dream home.

Key benefits of Bajaj Housing Finance Home Loan:

• Low EMIs starting at just Rs. 722/lakh*
• No foreclosure fees for individual borrowers on floating rate loans
• Doorstep document collection service
• Balance transfer with top-up loan facility up to Rs. 1 crore*
• 5,000+ approved projects for quick loan processing

Ready to save on taxes while fulfilling your homeownership dreams? Check your eligibility now by entering your mobile number and OTP. You may already qualify for attractive home loan options tailored to your needs.