Perquisites

What is Perquisites in Income Tax? 

When the employees of a company get extra perks and benefits apart from their salary, they are perquisites, meaning in income tax. It does not include the reimbursements given by the employer. It is a part of the pay structure and CTC. It is a type of compensation given to employees in return for their service, where money is not involved. 

Types of Perquisites in Income Tax

Here are the types of perquisites in Income Tax: 

1. Tax-Exempted Perquisites

It includes the benefits from the employer, such as the computers or laptops provided by the company, refreshments given during office hours, allowance for travelling, etc. There are nontaxable perquisites for an employee. It also includes the medical facilities, telephone or mobile bills, and many more. 

2. Taxable Perquisites

The employee provided benefits like rent-free living, medical expenses, water, electricity, gas supply, etc., come under taxable perquisites. The perquisites tax is applied on several other things like gifts above Rs 5000, free meals, club and gym facilities, and many more. The money reimbursed for the medical expense is also taxable under the perquisite bracket.

3. Perquisites taxable for specified employees

If any other perquisite or benefit that is given for free to the employees is also taxable for some specific employees. They are mentioned below:

• The employee who is the director of the company.
• Employees who have a substantial interest.
• Employees whose gross salary is more than Rs 50,000. 

Benefits of Perquisites

Here are some of the benefits of Perquisites for an employee: 

• It helps in increasing the loyalty of an employee towards their company.
• It attracts talented employees to the company.
• It helps to increase the productivity of an employee and improve their retention rate.