Perquisites, often called perks, are non-cash benefits an employer provides to an employee in addition to salary, and in India they are generally taxable as part of income from salary. They range from a company car to rent-free accommodation to interest-free loans. Because the income tax rules assign a taxable value to most perquisites, they affect both how a salary package is designed and how much tax an employee pays, which makes them an important part of compensation planning.
What counts as a perquisite?
Perquisites are benefits in kind rather than direct pay. Common examples include the following.
- Accommodation: rent-free or concessional housing provided by the employer.
- Company car: a vehicle provided for personal use, or a driver.
- Loans and benefits: interest-free or low-interest loans, club memberships, or subsidized services.
- Stock-based benefits: the value of shares allotted under employee stock plans can be treated as a perquisite when they vest.
How are perquisites taxed?
Most perquisites are taxable in the employee's hands, with the income tax rules setting out how to value each type. The general approach is as follows.
- Assigned value: each perquisite is given a taxable value based on prescribed rules, not always its market cost.
- Added to salary: that value is added to the employee's taxable salary and taxed at their slab rate.
- Some exemptions: certain benefits are exempt or concessionally taxed within limits, such as some medical or travel-related perks.
Perquisites vs allowances vs reimbursements
Perquisites are one of three ways employers add value beyond basic salary. The distinction affects how each is taxed.
| Type | What it is | Typical tax |
|---|---|---|
| Perquisite | Non-cash benefit | Usually taxable |
| Allowance | Cash for a purpose | Taxable unless exempt |
| Reimbursement | Repayment of an expense | Often not taxable |
This information is for general guidance. Confirm current rules and consult tax experts for your specific situation.
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