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Recent notification on taxing the perquisites - More on the topic

In my last post on the taxing the employees on the perquisite (which was earlier taxed as FBT). Some of my friends wanted more clarity on this. I am giving my interpretation and anyone has to plan their salary package, better check with their tax consultants or their auditors before doing so.

Let me discuss some of them.


(a) Provision of meals to employees during the office hours

Under the FBT rules, it was exempted. But now they have brought in the perquisite valuation back. Upto Rs.50 per meal, it is exempted. This was the old valuation before FBT. Now that the prices have gone up tremendously, they should have thought about increasing the limit alteast, if not exempting the perquisite.


(b) Provision of Credit Cards

Any annual fee paid by the Company for the employee is now taxable as perquisite. Nowadays, all the cards are coming as "Free for life time". So, this may not hit the employee much. If you have any cards which you have acquired based on reimbursement by company, the annual fee or joining fee, consider surrendering or continuing based on the benefits. The fee paid by your employer is now taxable


(c) Provision of Club Memberships

Now the reimbursement or provision of club membership by the employers is taxable in the hands of the employees as perquisite.

(d) Provision of transportation

If it is used solely for official purposes, it is not taxable. But the onus is on the employee & employer to prove it.

If it is used for both official and personal purposes, then it will be treated as used for personal purposes. Ridiculous isn't it?

The valuation is as below:
  • For cars with a capacity of less than 1.6 litre,  Rs 1,800 for the vehicle and Rs 500 for chauffeur. 
  • For cars above that category, valuation will be Rs 2,400 for car and Rs 900 for chauffeur.
The transportation allowances of Rs.800 remains unchanged.

(e) Provision of residential accommodation

Any residential accommodation provided by employer with or without the following facilities:
  • supply of gas, electric energy and water
  • watchman, sweeper, and any personal staff
is taxable in the hands of the employee, as it is now.

(f) Concessional education facilities to employee or any member of the household

It is taxable as perquisite.


(g) Carriage of household goods

It is taxable as perquisite. Need further clarification. In today's world, people migrate to places. Will the re-location allowance paid is taxable as perquisite?

(h) Interest-free or concessional loans 

Any loan given to an employee at a concessional rate or as interest free is taxable as perquisite. The only exception is medical treatment expenses reimbursed under any insurance scheme.


(i) Concessional or Free travel / tour

Any concessional tour or travel to employee is taxable. It includes the value of travel/tour, accommodation or any other expenses which were directly paid by or reimbursed by the employer.

(j) Subscription to periodicals

Any reimbursement for subscription of periodicals are taxed as perquisite.


(k) Gift or Gift Voucher or Token

Any gift or gift voucher or token with value of Rs.5000 and above are taxable.


(l) Stock Options

I am not discussing on this topic, as it has various permutation combinations depending on the scenario / type of options.

To conclude, any expenses which were reimbursed or directly paid by the employer on your behalf is taxable, unless specifically exempted.

As mentioned earlier, please check with your tax consultant before taking any decision.

Cheers,
Gopal

2 comments:

Gopal Ramanan on Dec 30, 2009, 2:45:00 PM said...

Anyone want to see the full notification, click on the following link;
http://law.incometaxindia.gov.in/TaxmannDit/DispCitation/ShowCit.aspx?fn=http://law.incometaxindia.gov.in/DitTaxmann/Notifications/IncomeTaxAct/2009/Not94_2009.htm

Mandeep on Dec 30, 2009, 8:46:00 PM said...

Trillions of Thanx Sir for enlightning us...Rgds, Mandeep Singh Rawal

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