Income tax benefits available to Salaried Persons

a) Actual HRA Received

b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Madras)

c) Rent paid minus 10% of salary

* Salary= Basic + DA (if part of retirement benefit) + Turnover based Commission

Note:

i.  Fully Taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent

ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10th October, 2013].

a) 70% of such allowance; or

b) Rs. 10,000 per month.

a) Value of rent free official residence

b) Value of conveyance facilities including transport allowance

c) Sumptuary allowance

d) Leave travel concession

The value of residential telephone free of cost and the number of free calls to the extent of 1500 per month shall be exempt.

b) Up to Rs. 1,600 per month (for altitude above 15,000 feet)

A. If House Property is owned by the employer:

i. 15% of salary, if population of city where accommodation is provided exceeds 25 lakhs as per 2001 census

ii. 10% of salary, if population of city where accommodation is provided exceeds 10 lakhs but does not exceed 25 lakhs as per 2001 census

iii. 7.5% of salary, if accommodation is provided in any other city

B. If House Property is taken on lease or rent by the employer, the perquisite value shall be :

i. Lease rent paid or payable by the employer or 15% of the salary, whichever is lower

*Salary includes:

a) Basic Pay

b) Dearness Allowance (only to the extent it forms part of retirement benefit salary)

c) Bonus

d) Commission

e) All other allowances (only taxable portion)

f) Any monetary payment which is chargeable to tax

But does not include

i. Value of any perquisite [under section 17(2)]

ii. Employer’s contribution to PF

iii. Benefits received at the time of retirement like gratuity, pension etc.

Note:

1) Rent free accommodation is not chargeable to tax if provided to an employee working at mining site or an on-shore oil exploration site, etc.,—

(i) which is being of temporary nature (subject to conditions)

(ii) which is located in remote area.

2) Rent free accommodation if provided to High Court or Supreme Court Judges, Union Ministers, Leader of Opposition in Parliament, an official in Parliament and Serving Chairman and members of UPSC is Tax Free Perquisites.

3) The value so determined shall be reduced by the amount of rent, if any, paid by the employee.

4) If employee is transferred and retain property at both the places, the taxable value of perquisites for initial period of 90 days shall be determined with reference to only one accommodation (at the option of the assessee). The other one will be tax free. However after 90 days, taxable value of perquisites shall be charged with reference to both the accommodations.

a) Find out taxable value of perquisite assuming accommodation to be provided to the employee is unfurnished

b) Add: 10% of original cost of furniture and fixtures (if these are owned by the employer) or actual higher charges paid or payable (if these are taken on rent by the employer).

Note: The value so determined shall be reduced by the amount of rent, if any, paid by the employee

Value of perquisite shall be lower of following:

a) Actual charges paid or payable by the employer to such hotel

b) 24% of salary

Note: Hotel accommodation will not be chargeable to tax if :

a) It is provided for a total period not exceeding in aggregate 15 days in the financial year; and

b) Such accommodation in hotel is provided on employee’s transfer from one place to another place.

(a) in a recognised provident fund;

(b) in the scheme referred to in section 80CCD(1); and

(c) in an approved superannuation fund

(Taxable in case of specified employee only [See Note 4])

1. Manufacturing cost per unit incurred by the employer., if provided from resources owned by the employer;

2. Amount paid by the employer, if purchased by the employer from outside agency

Note:

i.  Any amount recovered from the employee shall be deducted from the taxable value of perquisite.

ii.  Taxable in case of specified employees only [See note 4]

(Taxable in case of specified employee only [See Note 4])

Fair Market value of shares or securities on the date of exercise of option by the assessee less amount recovered from the employee in respect of such shares shall be the taxable value of perquisites.

Fair Market Value shall be determined as follows:

a) In case of listed Shares: Average of opening and closing price as on date of exercise of option (Subject to certain conditions and circumstances)

b) In case of unlisted shares/ security other than equity shares: Value determined by a Merchant Banker as on date of exercise of option or an earlier date, not being a date which is more than 180 days earlier than the date of exercise of the option.

Note:

The Finance Act, 2020 has deferred the taxation of perquisite in case of start-ups from date of allotment to the earliest of the following three dates:

1. Expiry of 48 months from the end of the relevant assessment year;

2. Sale of such shares by the employees;

3. Date on which employee ceases to be employee of the start-up.

The eligible start-up shall accordingly, be required to deposit tax with the government within 14 days of the happening of any of the above events (whichever is earlier). However, Section 17(2)(vi) has not been amended, thus the income shall be computed in the year in which shares are allotted but tax shall be paid in subsequent year.

1. Find out the ‘maximum outstanding monthly balance’ (i.e. the aggregate outstanding balance for each loan as on the last day of each month);

2. Find out rate of interest charged by the SBI as on the first day of relevant previous year in respect of loan for the same purpose advanced by it;

3. Calculate interest for each month of the previous year on the outstanding amount (mentioned in point 1) at the rate of interest (given in point 2)

4. Interest actually recovered, if any, from employee

5. The balance amount (point 3-point 4) is taxable value of perquisite

Nothing is taxable if:

a) Loan in aggregate does not exceed Rs 20,000

b) Loan is provided for treatment of specified diseases (Rule 3A) like neurological diseases, Cancer, AIDS, Chronic renal failure, Hemophilia (specified diseases). However, exemption is not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

b) Where such facility is maintained by the employer, and is not available uniformly to all employees, the value of benefit shall be taken to be the value at which such facilities are offered by other agencies to the public less amount recovered from employee.

2) Exempt from tax: Following free meals shall be exempt from tax

a) Food and non-alcoholic beverages provided during working hours in remote area or in an offshore installation;

b) Tea, Coffee or Non-Alcoholic beverages and Snacks during working hours are tax free perquisites;

c) Food in office premises or through non-transferable paid vouchers usable only at eating joints provided by an employer is not taxable, if cost to the employer is Rs. 50(or less) per meal.

b) Gift in kind up to Rs.5,000 in aggregate per annum would be exempt, beyond which it would be taxable.

b) Expenses incurred for official purposes shall not be a taxable perquisite provided complete details in respect of such expenditure are maintained by the employer

b) Expenses incurred on club facilities for the official purposes are exempt from tax.

c) Use of health club, sports and similar facilities provided uniformly to all employees shall be exempt from tax.

a) Use of Laptops and Computers: Nil

b) Movable asset other than Laptops, computers and Motor Car*: 10% of original cost of the asset (if asset is owned by the employer) or actual higher charges incurred by the employer (if asset is taken on rent) less amount recovered from employee.

*See Note 1 for computation of perquisite value in case of use of the Motor Car

a) Computers, Laptop and Electronics items: Actual cost of asset less depreciation at 50% (using reducing balance method) for each completed year of usage by employer less amount recovered from the employee

b) Motor Car: Actual cost of asset less depreciation at 20% (using reducing balance method) for each completed year of usage by employer less amount recovered from the employee

c) Other movable assets: Actual cost of asset less depreciation at 10% (on SLM basis) for each completed year of usage by employer less amount recovered from the employee.

However expenses on telephones including a mobile phone incurred by the employer on behalf of employee shall not be treated as taxable perquisite.

*Family includes spouse, children and dependent brother/sister/parents. However, family doesn’t include more than 2 children of an Individual born on or after 01-10-1998.

i. Exemption limit where journey is performed by Air – Air fare of economy class in the National Carrier by the shortest route or the amount spent, whichever is less

ii. Exemption limit where journey is performed by Rail – Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less

iii. Exemption limit if places of origin of journey and destination are connected by rail but the journey is performed by any other mode of transport – Air-conditioned first class rail fare by the shortest route or the amount spent, whichever is less

iv. Exemption limit where the places of origin of journey and destination are not connected by rail:

a. Where a recognized public transport system exists – First Class or deluxe class fare by the shortest route or the amount spent, whichever is less

b. Where no recognized public transport system exists – Air conditioned first class rail fare by shortest route or the amount spent, whichever is less

Notes:

i. Two journeys in a block of 4 calendar years is exempt

ii. Taxable only in case of Specified Employees [See note 4]

a)  Hospital maintained by the employer.

b)  Hospital maintained by the Government or Local Authority or any other hospital approved by Central Government

c)  Hospital approved by the Chief Commissioner having regard to the prescribed guidelines for treatment of the prescribed diseases.

2) Medical insurance premium paid or reimbursed by the employer is not chargeable to tax.

a) Expenses on medical treatment – exempt to the extent permitted by RBI.

b) Expenses on stay abroad for patient and one attendant – exempt to the extent permitted by RBI.

c) Cost on travel of the employee or any family or one attendant – exempt, if Gross Total Income (before including the travel expenditure) of the employee, does not exceed Rs. 2,00,000.

a) Rs 5,000

b) 1/5th of salary (excluding any allowance, benefits or other perquisite)

c) Actual entertainment allowance received

a) Amount actually received

b) Unutilized earned leave* X Average monthly salary

c) 10 months Average Salary**

d) Rs. 3,00,000

*While computing unutilized earned leave, earned leave entitlements cannot exceed 30 days for each year of service rendered to the current employer

**Average salary = Average Salary*** of last 10 months immediately preceding the retirement

***Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission

a) an amount calculated as per section 25F(b) of the Industrial Disputes Act, 1947;

b) Rs. 5,00,000; or

c) Amount actually received

Note:

i. Relief under Section 89(1) is available

ii. 15 days average pay for each completed year of continuous service or any part thereof in excess of 6 months is to be adopted under section 25F(b) of the Industrial Disputes Act, 1947.

1. (*15/26) X Last drawn salary** X completed year of service or part thereof in excess of 6 months.

2. Rs. 20,00,000

3. Gratuity actually received.

*7 days in case of employee of seasonal establishment.

** Salary = Last drawn salary including DA but excluding any bonus, commission, HRA, overtime and any other allowance, benefits or perquisite

1. Half month’s Average Salary* X Completed years of service

2. Rs. 20,00,000

3. Gratuity actually received.

*Average salary = Average Salary of last 10 months immediately preceding the month of retirement

** Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits)+ turnover based commission

1) Actual amount received as per the guidelines i.e. least of the following

a) 3 months salary for each completed year of services

b) Salary at the time of retirement X No. of months of services left for retirement; or

2) Rs. 5,00,000

Note: Partial withdrawal from the NPS shall be exempt to the extent of 25% of amount of contributions made by the employee.

a) Foreign enterprise is not engaged in any trade or business in India

b) His stay in India does not exceed in aggregate a period of 90 days in such previous year

c) Such remuneration is not liable to deducted from the income of employer chargeable under this Act