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Note
1 :- Where employer or employee claims that motor
car is used wholly and exclusively in the performance
of official duty or that the actual expenses on the
running and maintenance of motor car owned by employee
for official purposes is more than the amount deductible,
he may claim higher amount attributable to such official
use and the value of perquisite shall be the actual
amount of charges met or reimbursed by employer as reduced
by such higher amount attributable to official use of
vehicle provided following conditions are fulfilled
:-
- 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;
- the
employer gives a certificate that the expenditure
was incurred wholly and exclusively for performance
of his official duty;
the supervising authority of the employee, wherever
applicable, gives a certificate to the effect that
the expenditure was incurred wholly and exclusively
for the performance of official duties.
- Normal
wear and tear of motor car shall be taken at 10% per
annum of the actual cost of the motor car(s)
- Gas,
Electric Energy, Water
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Basis
of Taxability
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Value
of Perquisite
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where
supply is made from resources owned by the employer
without purchasing them from any other outside
agency.
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manufacturing
cost per unit incurred by employer.
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where
supply is made by the employer by purchasing them
from outside agencies.
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amount
paid by the employer to supplying agency.
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- Free
or Concessional Educational Facilities for any Member
of Employee's Household.
Taxability
of this perquisite would be as under :
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Basis
of Taxability
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Value
of Perquisite
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amount
spent by employer for free or concessional educational
facilities for any member of his household.
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expenditure
incurred by the employer in that behalf.
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education
facilities to employee's family members in institution
maintained by employer or in any other, educational
institution by reason of his being in employment
of that employer.
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cost
of education in a similar institution in or near
the locality.
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educational
facilities to children of employee in educational
institution maintained and owned by employer or
in any institution by reason of his being in employment
of that employer
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not
taxable if value of such benefit per child does
not eceed rs 1000/- per month
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- Sweeper,
Gardener, Watchman, Personal attendant
Where
employer has provided sweeper, gardener, a watchman
or a personal attendant, the actual cost to the employer
shall be taxable as perquisite, which shall be calculated
as the total amount of salary paid to them as reduced
by any amount paid by employee for such services.
- Free
or Concessional Fare
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Bsis
of Taxability
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Value
of Perquisite
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provision
by any undertaking engaged in carriage of passengers
or goods to employee or to any member of his household
for free or at concessional fare, in any conveyance
owned, leased or made available by any other arrangement
by the undertaking.
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value
at which such benefit or amenity is offered by
such undertaking to the public.
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- Interest
Ffree or Concessional Loan
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Bsis
of Taxability
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Value
of Perquisite
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interest
free or concessional loan to employee or any member
of his household by the employer or any person
on his behalf.
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sum
equal to the simple interest computed @ 10% p.a.
in respect of loans for house and conveyance and
@ 13% p.a. for other loans on the maximum outstanding
monthly balance
note
: no value would be charged if loans are made
available for medical treatment in respect of
diseases specified in prescribed rule and where
loans are petty, not exceeding in the aggregate
rs. 20,000/-.
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-
Free Meals
Value
of perquisites shall be amount of expenditure incurred
by the employer. Where free meals are provided by
employer during office hours at office or business
premises or through paid vouchers not transferable
and usable only at eating joints, if the value thereof
in either case is upto Rs. 50/- per meal or to tea
or snacks provided during office hours or to free
meals during working hours provided in a remote area
or offshore installation, such amount is not taxable
as perquisite in the hands of employee.
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Gift or Voucher or Token
Value
of perquisites shall be sum equal to the amount of
gift or voucher or token in lieu of which such gift
may be received by the employee or by member of his
household on ceremonial occasions or otherwise. No
perquisite where the value is below Rs. 5000/- in
aggregate during previous year.
- Credit
Card
Value
of perquisite shall be the amount of expenses including
membership fees and annual fees incurred by the employee
or any member of his household. Where expenses are
for official purposes, the amount are not taxable
provided the following conditions are fulfilled :-
-
complete details in respect of such expenditure
is maintained by employer;
-
certificate by the employee that such expenditure
was incurred wholly and exclusively for the performance
of official duty;
-
certificate from supervising authority of employee
that expenditure is incurred for performance of
official duties;
-
where employee incurs expenditure on entertainment
& incurred for official duty, details of such
expenses.
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Moveable Asset
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Basis
of Taxability
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Value
of Perquisite
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where
any moveable asset other than laptops and computers
belonging to employer or hired by him for the
use of employee or any member of his house.
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value
shall be determined @ 10% p.a. of actual cost
of such asset or amount of rent or charge paid
or payable by employer.
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where
any moveable asset belonging to employer are transferred
to employee directly or indirectly or any member
of his household.
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actual
cost of asset to employer as reduced by normal
wear and tear @ 10% of such cost for each completed
year during which asset was put to use by employer.
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in
case of computers and electronic items
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actual
cost to employer as reduced by normal wear and
tear @ 50%. by reducing method.
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in
case of motor cars
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actual
cost reduced by normal wear and tear @ 20%. by
reducing method.
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Expenditure in Club
Actual
amount of expenditure including annual or periodical
fee or incurred by employee or by any member of his
household.
Where
corporate membership of club is obtained by employer,
which is enjoyed by employee or any member of his
house, value of perquisite shall not include fees
paid for acquiring corporate membership.
If
such expenditure is incurred wholly and exclusively
for business purposes, and the following conditions
are fulfilled :-
- complete
details in respect of such expenditure is maintained
by employer;
- certificate
by the employee that such expenditure was incurred
wholly and exclusively for the performance of official
duty;
- certificate
from supervising authority of employee that expenditure
is incurred for performance of official duties;
- where
employee incurs expenditure on entertainment incurred
for official duty, details of such expenses.
- Where
use of health club, sports and similar facilities
are provided uniformly to all employees by the employer,
no amount is taxable.
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Travelling, Touring, Accommodation and any other
Expenses
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Basis
of Taxability
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Value
of Perquisite
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Where
such expenses are borne or reimbursed by employer
for any holiday availed by employee or member
of his house.
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Amount
incurred by employer.
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Where
such facility is maintained by employer and is
not available uniformly to all employees.
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Value
at which such facilities are offered by other
agencies to public.
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Where
employee is on official tour and expenses are
incurred in respect of any member of his house
accompanying him.
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Amount
of such expenses.
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Where
official tour is extended as a vacation.
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Value
shall be limited to expenses incurred in relation
to such extended period of stay or vacation.
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- In
calculating value of taxable perquisites in cases
1 to 14 above, the amount to the extent paid or recovered
from the employee shall be reduced.
- The
expenses on telephones including a mobile phone actually
incurred on behalf of employee by employer shall not
be taxable in the hands of employee.
- The
value of any other benefit or amenity, service, right
or privilege provided by employer shall be determined
on the basis of cost to the employer under an arm's
length transaction.
Note
:- This Rule 3 is effective from 1.4.2001 but employee
may at his option compute value of all perquisites made
available to him or any member of his household for
the period 1.4.2001 to 30.9.2001 in accordance with
the Rule 3 as stood prior to amendment.
- Medical
Facilities
Sums
paid by an employer in respect of expenditure actually
incurred by the employee such as hospital fees, operation
fees, cost of medicines, tests etc., on himself or
his family's medical treatment provided that the expenditure
is incurred in government recognized hospitals and
in respect of prescribed diseases or ailments, are
not taxable as perquisite in the hands of the employee.
Sums
reimbursed by the employer on medical expenses claimed
by an employee, incurred on his medical treatment
or treatment of any member of his family, upto a maximum
of Rs. 15,000/- per annum, are also exempt from tax
in the hands of the employee.
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Stock Options
The
value of any benefit provided by a company free of
cost or at a concessional rate to its employees by
way of allotment of shares, debentures or warrants
directly or indirectly under any Employees Stock Option
Plan or Scheme of the company offered to employees
in accordance with the guidelines issued in this behalf
by the Central Government, is not taxable.
Any
profits and gains arising from the transfer of shares/debentures/warrants
allotted under ESOP shall be chargeable to income
tax under the head 'capital gains' and shall be deemed
to be income of previous year in which transfer took
place. When shares or any other security listed in
recognized stock exchange is held by assessee for
not more than 12 months. Immediately preceding the
date of transfer, such capital gains shall be 'short
term capital gains'.
- It
shall be included with the other income of assessee
and shall be accordingly taxed at the rates given
in Chapter C.
- When
shares or any other securities are held for more
than 12 months before transfer, such capital gains
shall be 'long term capital gains'. It shall be
taxed @ 10% on the full value of consideration
or @ 20% on the difference between full value
of consideration and indexed cost of acquisition
& indexed cost of any improvement. The tax
shall be increased by surcharge rates given in
Chapter C.
- indexed
cost of acquisition' means an amount which bears
to the cost of acquisition the same proportion
as cost Inflation index for the year in which
the asset is transferred bears to the cost inflation
index for the first year in which the asset was
held by the assessee or for the year beginning
on the 1st day of April 1981, whichever is later.
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'indexed cost of any improvement' means an amount
which bears to the cost of improvement the same
proportion as cost inflation index for the year
in which the asset is transferred bears to the
cost inflation index for the year in which the
improvement to the asset took place.
- Cost
inflation index is notified by Central Government.
- If
shares, debentures or warrants allotted under
ESOP are transferred to any person under a gift
or an irrevocable trust, such transfer shall be
taxed as long term capital gains @ 10% on the
market value on the date of such transfer. It
may also be taxed @ 20%, as mentioned above, on
the difference between the market value of such
shares/debentures/warrants and cost of acquisition.
The tax on capital gains shall be increased by
surcharge rates given in Chapter C.
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Social Security Insurance
OBLIGATION
There is no regulation in India, requiring compulsory
coverage for Social Security benefits. Local establishments
have obligation to introduce compulsory contributory
schemes like Provident fund (normally covering contribution
upto 12% on basic salary each by employer and employee)
in which both employee and employer participate. Such
obligation, however does not extend to foreign company
having no office in India.
There
are no compulsory insurance requirements except for
very low level employees employed in Industrial establishments.
Accordingly, foreign personnel would not be required
to have any compulsory insurance in India.
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