Tuesday, February 14, 2012

Employees -Tax Free Perquisites

How to Save Income Tax on Salary
All Tax Free Perquisites for Salaried employees are explained below :-
  1.  Medical Facility or Medical Reimbursement:
    (a)  Medical Facility :- The value of any medical treatment provided to an employee or any member of his family in a hospital, dispensary or a nursing home maintained by the employee shall be a tax free perquisite. 
    (b)  Medical Reimbursement :  Any sum paid by the employer in respect of any expenditure incurred by the employee on his medical treatment or treatment of any member of his family subject to maximum of Rs. 15,000 in the previous year.
  2. Recreational Facilities : Any recreational facility provided to a group of employees (not being restricted to a select few employees) by the employer is not taxable.
  3. Training of Employees: Any expenditure incurred by the employer, for providing training to the employees or by way of payment of fees of refresher courses attended by the employees.
  4.  Use of health club, sports and similar facilities provided uniformly to all employees by the employer.
  5. Expenses on Telephone, including  a mobile phone, actually incurred on behalf on the employee by the employer.
  6. Employer’s Contribution:  Employer’s contribution to superannuation fund of the employee or provided such contribution does not exceed Rs. 1,00,000 per employee per year.
  7.  The premium paid by the employer on an accident policy taken out by it in respect of the employee would not be a perquisite. [CIT v Lala Shri Dhar (1972) 84 ITR 192 (Del) and CIT v Vinay Bharat Ram (1981) 129 ITR 128 (Del)].
  8. Motor car provided by the employer to the employee or expenses incurred by the employer in connection with motor  car belonging to the employee (for purposes other than exclusively for personal purposes) shall be a tax free perquisite in the hands of the employee.
  9. Amount given by the employer of assessee to assessee’s child as scholarship is exempt under section 10(16). [CIT v B.L. Garg (2006) 155 Taxman 189 (All)]
  10. Food and Beverages provided to Employees: The following shall be a tax free perquisite in the hands of the employees-
       (i)  free food and non-alcoholic beverages provided by the employer to his employees during working hours:
              (a)  at office or business premises or 
             (b)  through paid vouchers which are not transferable and usable only at eating joints. 
                Provided the value of such meal is upto Rs. 50 per meal. 
        (ii)  Any tea or snacks provided during working hours. 
      (iii) Free food and non-alcoholic beverages during working hours provided in a remote area or offshore installation.
  11. Loans to Employees : - In the following cases the value of benefit to the assessee resulting from the provision of interest free or concessional loan shall be nil :
         (a)  where the amount of loans are petty, no exceeding in the aggregate Rs. 20000;
        (b)  Loans made available for medical treatment in respect of disceases specified in rule 3A of the Income-tax Rules.   However, the exemption so provided shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.
  12. Perquisites provided outside India :  Perquisites provided by the Government to its employees, who are citizens of india for rendering services outside India, are not taxable.  [Section 10(7)].
  13. Rent Free House/Conveyance Facility: Rent free official residence and conveyance facilities provided to a Judge of the Supreme Court/High Court is not a taxable perquisite.
  14. Specified Perquisite allowed to certain Persons:
        (a)  Specified perquisites allowed to Judges of the Supreme Court, Chief Election Commissioner, Election Commissioner. 
         (b)  Chairman or retired Chairman, member or a retired member of U.P. S.C. 
                are not taxable perquisites.
  15. Residence to officials of Parliament etc. :-  The Rent Free furnished residence (including maintenance thereof) provided to an officer of the Parliament a Union Minister or Leader of Opposition in Parliament, is not a taxable perquisite.
  16. Accommodation in a Remote Area : - The accommodation provided by the employer shall be a  tax free perquisite if the accommodation is provided to an employee working at mining site or an onshore oil exploration site or a project execution site, or a dam site or a power generation site or an offshore site which -
         (a)  being of a temporary nature and having plinth area not exceeding 800 square feet, is located not less than eight kilometres away from the local limits of any municipality or a cantonment board; or
        (b)  is located in a remote area.
  17.  Educational Facility for Children of the Employee:  where the educational institution itself 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 being in employment of that employer,  there shall be no perquisite value if the cost of such education or the value of such benefit per child does not exceed Rs. 1,000 p.m.
  18. Use by the employee or any member of his household of laptops and computers belonging to the employer or hired by him.
  19. Leave Travel  Connection will be discussed in detail later.
  20. Tax paid by the Employer on Non-Monetary Perquisites : Tax paid by the employer on non-monetary perquisites of the employee shall be exempt in the hands of the employee.  [Section 10(10CC)]

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