Tax Free Perquisites – Income Tax Act
List of Tax-Free Perquisites – Income Tax Act
A perquisite refers to any form of non-cash remuneration made available by an employer to an employee. In other words, any non-cash consideration paid by an employer to the employee is considered to be a perquisite. Perquisites provided by an employer to an employee are taxable under the head of income known as Income from Salaries. However, some types of perquisites are tax-free in the hands of the employee. For effective tax planning and reduction of tax liability, the employer and employee must be aware of the list of tax-free perquisites which are provided by the Income Tax Act. In this article, we have provided a list of some of the tax-free perquisites mentioned under the Income Tax Act.
Medical Facilities & Reimbursements
The value of medical treatment provided to an employee or any member of his/her family in a hospital, dispensary or a nursing home maintained by the employer will be a tax-free perquisite. Also, any money paid by the employe for expenditure incurred by the employee on his/her medical treatment or treatment of any member of his family subject to a maximum of Rs.15,000 in the previous year will be treated as a tax-free perquisite.
Recreational Facilities
Any recreational facility provided to a group of employees by the employer is not taxable. Thus, health club, sports and similar facilities provided uniformly to all employees by the employer is a tax-free perquisite.
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Any cost incurred by the employer for providing training to the employees or by way of payment of fees or refresher courses attended by the employees can be treated as tax-free perquisite.
Telephone & Laptops
Expenses incurred by an employer on a telephone, mobile phone or use by the employee or any member of his household, a laptop or computer belonging to the employer can be treated as a tax-free perquisite.
Education for Children
Any amount is given by an employer to an employees child as scholarship is a tax-free perquisite. Also, if an educational facility is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his/her being in employment of that employer, then the value of benefit provided can be treated as a tax-free perquisite if the amount does not exceed Rs.1000 per child per month.
Food and Beverage
Free food and non-alcoholic beverages provided by an employer to an employee during working hours at office premises or through a paid voucher that are not transferable and usable only at select places is a tax-free prerequisite, provided the value of such a mean is up to Rs.50 per meal.
Loan to Employees
Any loan of an amount of less than Rs.20,000 provided as a loan to an employee can be treated as a tax-free perquisite. Also, the loan provided by an employer for medical treatment in respect of diseases specified in Rule 3A of the Income Tax Rules is tax-free.
Insurance Premium & Pension Contributions
An insurance premium paid by an employer on an accident policy taken out for the employee is a tax-free perquisite. Also, employers contribution to the superannuation fund of the employee provided such contribution does not exceed Rs.1,50,000 per employee per year can be treated as a tax-free perquisite.
Prerequisites Provided Outside India
Perquisites allowed outside India by the Government to the employees, who are citizens of India for rendering services outside India which are not taxable.
Rent Free House/ Conveyance Facility
The rent-free accommodation and conveyance facilities are provided to a judge of a supreme court or high court that is not a taxable perquisite.
Residence to Officials of Parliament
The rent-free furnished residence that includes the maintenance provided to an officer of the parliament, a union minister or leader opposition in parliament, that is not a taxable perquisite.
Accommodation in a Remote Area
The accommodation provided by the employer would be a tax-free prerequisite if the accommodation is granted to an employee working at mining site or an onshore oil exploration site or a dam site or a project execution site, or a power generation site or an offshore site which is being of a temporary nature and having plinth area which is not exceeding more than 800 square feet, is located not less than 8 kilometres distance away from the local limits of municipality or a cantonment board (or) is located in a remote area.
Tax by Employer on Non-monetary Perquisites
A tax that is paid by the employer on non-monetary perquisites of the employee would be exempt in the hands of the employee. The notified perquisites paid both to serve and retired chairman and members of union public service commission.
Leave Travel Concession (LTC)
The employee is entitled to the exemption under section 10(5) in respect of the value of the travel concession or assistance that is received by or due to him from his employer family, in connection with his proceeding-
- On leave to any destination in India
- To any destination in India after retirement from service or after the termination of his service.
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