INCOME-TAX (THIRTEENTH AMENDMENT) RULES, 2009 - SUBSTITUTION OF

RULE 3 AND INSERTION OF RULE 40F

Notification No. 94/2009/ F.No.142/25/2009-S O (TPL)

Dated 18-12-2009

In exercise of the powers conferred by section 295 read with sub-section (2) of section 17
of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the
following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (13th Amendment) Rules, 2009.

(2) They shall be deemed to have come into force on the 1st day of April, 2009.

2. In the Income-tax Rules, 1962, for rule 3, the following shall be substituted, namely:-

3. For the purpose of computing the income chargeable under the head Salaries, the value of
perquisites provided by the employer directly or indirectly to the assessee (hereinafter referred to
as employee) or to any member of his household by reason of his employment shall be
determined in accordance with the following sub-rules, namely:-

(1) The value of residential accommodation provided by the employer during the previous year
shall be determined on the basis provided in the Table below:

TABLE I

Sl. Circumstances Where accommodation is Where accommodation is

No. unfurnished furnished
(1) (2) (3) (4)
Where theLicense fee determined by theThe value of perquisite as
accommodation isCentral Government or anydetermined under column (3)
provided by the CentralState Government in respect ofand increased by 10% per
Government or any Stateaccommodation in accordanceannum of the cost of furniture
Government to thewith the rules framed by such(including television sets,
employees either holdingGovernment as reduced by theradio sets, refrigerators, other
office or post inrent actually paid by thehousehold appliances, air-
connection with theemployee. conditioning plant or
affairs of the Union or of equipment) or if such furniture
such State. is hired from a third party, the
actual hire charges payable for
the same as reduced by any
charges paid or payable for he
same by the employee during
the previous year.
Where the
accommodation is
provided by any other
employer and

(a) where the 15% of salary in cities havingThe value of perquisites as

accommodation is population exceeding 25determined under column (3)
owned by the lakhs as per 2001 census;and increased by 10% per
employer, or annum of the cost of furniture
10% of salary in cities having(including television sets,
population exceeding 10refrigerators, other household
lakhs but not exceedingappliances, air-conditioning
25 lakhs as per 2001plant or equipment or other
census; similar appliances or gadgets)
or if such furniture is hired
from a third party, by the
7.5% of salary in other areas, actual hire charges payable for
the same as reduced by any
in respect of the period duringcharges paid or payable for the
which the said accommodationsame by the employee during
was occupied by the employeethe previous year.
during the previous year as
reduced by the rent, if any,
actually paid by the employee.

Actual amount of lease rental

paid or payable by the
employer or 15% of salary
whichever is lower as reducedThe value of perquisite as
(b) where theby the rent, if any, actually paiddetermined under column (3)
accommodation isby the employee. and increased by 10% per
taken on lease or annum of the cost of furniture
rent by the (including television sets,
employer. radio sets, refrigerators, other
household appliances, air-
conditioning plant or
equipment or other similar
appliances or gadgets) or if
such furniture is hired from a
third party, by the actual hire
charges payable for the same
as reduced by any charges paid
or payable for the same by the
employee during the previous
year.
Where theNot applicable 24% of salary paid or payable
 accommodation is for the previous year or the
provided by the employer actual charges paid or payable
specified in serial number to such hotel, which is lower,
(1) or (2) in a hotel for the period during which
(except where the such accommodation is
employee is provided provided as reduced by the
such accommodation for rent, if any, actually paid or
a period not exceeding in payable by the employee:
aggregate fifteen days on
his transfer from one
place to another)

Provided that nothing contained in this sub-rule shall apply to any accommodation provided to
an employee working at a mining site or an on-shore oil exploration site or a project execution
site, or a dam site or a power generation site or an off-shore site-

which, being of a temporary nature and having plinth area not exceeding 800 square feet, is
located not less than eight kilometers away from the local limits of any municipality
or a cantonment board; or

which is located in a remote area:

Provided further that where on account of his transfer from one place to another, the employee
is provided with accommodation at the new place of posting while retaining the accommodation
at the other place, the value of perquisite shall be determined with reference to only one such
accommodation which has the lower value with reference to the Table above for a period not
exceeding 90 days and thereafter the value of perquisite shall be charged for both such
accommodations in accordance with the Table.

Explanation.- For the purposes of this sub-rule, where the accommodation is provided by the
Central Government or any State Government to an employee who is serving on deputation with
any body or undertaking under the control of such Government,-

the employer of such an employee shall be deemed to be that body or undertaking where the
employee is serving on deputation; and
the value of perquisite of such an accommodation shall be the amount calculated in
accordance with Sl. No. (2)(a) of Table I, as if the accommodation is owned by the
employer.

(2) (A) The value of perquisite by way of use of motor car to an employee by an employer shall
be determined in accordance with the following Table, namely:-

TABLE II

VALUE OF PERQUISITE PER CALENDAR MONTH

Sl. Circumstances Where cubic capacity of engineWhere cubic capacity of engine
No. does not exceed 1.6 litres exceeds 1.6 litres
(1) (2) (3) (4)
(1) Where the motor car is
owned or hired by the
employer and

is used wholly andNo value: No value:

exclusively in theProvided that the documentsProvided that the documents
performance of hisspecified in clause (B) of thisspecified in clause (B) of this
official duties; sub-rule are maintained by thesub-rule are maintained by the
employer. employer.

is used exclusively forActual amount of expenditureActual amount of expenditure

the private orincurred by the employer onincurred by the employer on the
personal purposes ofthe running and maintenance ofrunning and maintenance of
the employee or anymotor car during the relevantmotor car during the relevant
member of hisprevious year includingprevious year including
household and theremuneration, if any, paid byremuneration, if any, paid by
running andthe employer to the chauffeurthe employer to the chauffeur
maintenance as increased by the amountas increased by the amount
expenses are met orrepresenting normal wear andrepresenting normal wear and
reimbursed by thetear of the motor car and astear of the motor car and as
employer; reduced by any amountreduced by any amount charged
charged form the employee forform the employee for such
such use. use.

(c) is used partly in the

performance of
duties and partly for
private or personal
purposes of his own
or any member of his
household and-

(i) the expenses on

maintenance andRs. 1,800 (plus Rs. 900, ifRs. 2,400 (plus Rs. 900, if
running are metchauffeur is also provided tochauffeur is also provided to
or reimbursed byrun the motor car) run the motor car)
the employer;

(ii) the expenses on

running and
maintenance forRs. 600 (plus Rs.900, ifRs. 900 (plus Rs. 900, if
private orchauffeur is also provided bychauffeur is also provided to
personal use arethe employer to run the motorrun the motor car)
 fully met by thecar)
assessee.

(2) Where the employee

owns a motor car but the
actual running and
maintenance charges
(including remuneration
of the chauffeur, if any)
are met or reimbursed to
him by the employer and-

such reimbursement is
for the use of the
vehicle wholly andNo value: No value:
exclusively forProvided that the documentsProvided that the documents
official purposes; specified in clause (B) of thisspecified in clause (B) of this
sub-rule are maintained by thesub-rule are maintained by the
such reimbursement isemployer. employer.
for the use of the
vehicle partly for
official purposes andSubject to the provisions ofSubject to the provisions of
partly for personal orclause (B) of this sub-rule, theclause (B) of this sub-rule, the
private purposes ofactual amount of expenditureactual amount of expenditure
the employee or anyincurred by the employer asincurred by the employer as
member of hisreduced by the amountreduced by the amount
household. specified in Sl. No. (1)(c)(i)specified in Sl. No. (1)(c)(i)
above. above

(3) Where the employee

owns any other
automotive conveyance
but the actual running and
maintenance charges are
met or reimbursed to him
by the employer and
such reimbursement is for
the use of the vehicle
wholly andNo value: Not applicable.
 exclusively forProvided that the documents
official purposes; specified in clause (B) of this
sub-rule are maintained by the
such reimbursement is foremployer.
the use of vehicle
partly for official
purposes and partlySubject to the provisions of
for personal orclause (B) of this sub-rule, the
private purposes ofactual amount of expenditure
the employee. incurred by the employer as
reduced by the amount of Rs.
900.

Provided that where one or more motor-cars are owned or hired by the employer and the
employee or any member of his household are allowed the use of such motor-car or all of any of
such motor-cars (otherwise than wholly and exclusively in the performance of his duties), the
value of perquisite shall be the amount calculated in respect of one car in accordance with Sl.
No. (1)(c)(i) of Table II as if the employee had been provided one motor-car for use partly in the
performance of his duties and partly for his private or personal purposes and the amount
calculated in respect of the other car or cars in accordance with Sl. No. (1)(b) of Table II as if he
had been provided with such car exclusively for his private or personal purposes.

(B) Where the employer or the employee claims that the motor-car is used wholly and
exclusively in the performance of official duty or that the actual expenses on the running and
maintenance of the motor-car owned by the employee for official purposes is more than the
amounts deductible in Sl. No. 2(ii) or 3(ii) of Table II, he may claim a higher amount attributable
to such official use and the value of perquisite in such a case shall be the actual amount
attributable to official use of the vehicle provided that the 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 to the effect that the expenditure was incurred wholly and
exclusively for the performance of official duties.

Explanation.- For the purposes of this sub-rule, the normal wear and tear of a motor-car shall be
taken at 10% per annum of the actual cost of the motor-car or cars.

(3) The value of benefit to the employee or any member of his household resulting from the
provision by the employer or services of a sweeper, a gardener, a watchman or a personal
attendant, shall be the actual cost to the employer. The actual cost in such a case shall be the total
amount of salary paid or payable by the employer or any other person on his behalf for such
services as reduced by any amount paid by the employee for such services.
(4) The value of the benefit to the employee resulting from the supply of gas, electric energy or
water for his household consumption shall be determined as the sum equal to the amount paid on
that account by the employer to the agency supplying the gas, electric energy or water. Where
such supply is made from resources owned by the employer, without purchasing them from any
other outside agency, the value of perquisite would be the manufacturing cost per unit incurred
by the employer. Where the employee is paying any amount in respect of such services, the
amount so paid shall be deducted from the value so arrived at.

(5) The value of benefit to the employee resulting from the provision of free or concessional
educational facilities for any member of his household shall be determined as the sum equal to
the amount of expenditure incurred by the employer in that behalf or where the educational
institution is itself maintained and owned by the employer or where free educational facilities for
such member of employees household are allowed in any other educational institution by reason
of his being in employment of that employer, the value of the perquisite to the employee shall be
determined with reference to the cost of such education in a similar institution in or near the
locality. Where any amount is paid or recovered from the employee on that account, the value of
benefit shall be reduced by the amount so paid or recovered:

Provided that 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, nothing contained in this sub-rule shall apply if the cost of such education or the value
of such benefit per child does not exceed one thousand rupees per month.

(6) The value of any benefit or amenity resulting from the provision by an employer who is
engaged in the carriage of passengers or goods, to any employee or to any member of his
household for personal or private journey free of cost or at concessional fare, in any conveyance
owned, leased or made available by any other arrangement by such employer for the purpose of
transport of passengers or goods shall be taken to be the value at which such benefit or amenity
is offered by such employer to the public as reduced by the amount, if any, paid by or recovered
from the employee for such benefit or amenity:

Provided that nothing contained in this sub-rule shall apply to the employees of an airline or the
railways.

(7) In terms of provisions contained in clause (viii) of sub-section (2) of section 17, the following
other benefits or amenities and value thereof shall be determined in the manner provided
hereunder:

(i) The value of the benefit to the assessee resulting from the provision of interest-free or
concessional loan for any purpose made available to the employee or any member of
his household during the relevant previous year by the employer or any person on his
behalf shall be determined as the sum equal to the interest computed at the rate
charged per annum by the State Bank of India, constituted under the State Bank of
India Act, 1955 (23 of 1955), as on the 1st day of the relevant previous year in respect
of loans for the same purpose advanced by it on the maximum outstanding monthly
 balance as reduced by the interest, if any, actually paid by him or any such member of
his household:

Provided that no value would be charged if such loans are made available for
medical treatment in respect of diseases specified in rule 3A of these Rules or where
the amount of loans are petty not exceeding in the aggregate twenty thousand rupees:

Provided further that where the benefit relates to the loans made available for
medical treatment referred to above, 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.

(ii) The value of travelling, touring, accommodation and any other expenses paid for or
borne or reimbursed by the employer for any holiday availed of by the employee or
any member of his household, other than concession or assistance referred to in rule
2B of these rules, shall be determined as the sum equal to the amount of the
expenditure incurred by such employer in that behalf. 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. Where the employee is on official tour and the expenses
are incurred in respect of any member of his household accompanying him, the
amount of expenditure so incurred shall also be a fringe benefit or amenity:
Provided that where any official tour is extended as a vacation, the value of such fringe
benefit shall be limited to the expenses incurred in relation to such extended period of
stay or vacation. The amount so determined shall be reduced by the amount, if any,
paid or recovered from the employee for such benefit or amenity.

(iii) The value of free food and non-alcoholic beverages provided by the employer to an
employee shall be the amount of expenditure incurred by such employer. The amount
so determined shall be reduced by the amount, if any, paid or recovered from the
employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic
beverages provided by such employer during working hours at office or business
premises or through paid vouchers which are not transferable and usable only at
eating joints, to the extent the value thereof either case does not exceed fifty rupees
per meal or to tea or snacks provided during working hours or to free food and non-
alcoholic beverages during working hours provided in a remote area or an off-shore
installation.

(iv) The value of any 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 from the employer shall be determined as the sum equal to the amount of
such gift:
 Provided that where the value of such gift, voucher or token, as the case may be, is below
five thousand rupees in the aggregate during the previous year, the value of perquisite
shall be taken as nil.

(v) The amount of expenses including membership fees and annual fees incurred by the
employee or any member of his household, which is charged to a credit care
(including any add-on-card) provided by the employer, or otherwise, paid for or
reimbursed by such employer shall be taken to be the value of perquisite chargeable
to tax as reduced by the amount, if any paid or recovered from the employee for such
benefit or amenity:

Provided that there shall be no value of such benefit where expenses are incurred wholly
and exclusively for official purposes and the following conditions are fulfilled:

complete details in respect of such expenditure are maintained by the employer which
may, inter alia, include the date of expenditure and the nature of expenditure;

the employer gives a certificate for such expenditure to the effect that the same was
incurred wholly and exclusively for the performance of official duties.

(A) The value of benefit to the employee resulting from the payment or reimbursement by
the employer of any expenditure incurred (including the amount of annual or
periodical fee) in a club by him or by an member of his household shall be
determined to be the actual amount of expenditure incurred or reimbursed by such
employer on that account. The amount so determined shall be reduced by the amount,
if any paid or recovered from the employee for such benefit or amenity:

Provided that where the employer has obtained corporate membership of the club
and the facility is enjoyed by the employee or any member of his household, the value
of perquisite shall not include the initial fee paid for acquiring such corporate
membership.

Nothing contained in this clause shall apply if such expenditure is incurred wholly
and exclusively for business purposes and the following conditions are fulfilled:-
complete details in respect of such expenditure are maintained by the employer
which may, inter alia, include the date of expenditure, the nature of
expenditure and its business expediency;
the employer gives a certificate for such expenditure to the effect that the same was
incurred wholly and exclusively for the performance of official duties.

Nothing contained in this clause shall apply for use of health club, sports and similar
facilities provided uniformly to all employees by the employer.

The value of benefit to the employee resulting from the use by the employee or any member
of his household of any movable asset (other than assets already specified in this rule
and other than laptops and computers) belonging to the employer or hired by him
 shall be determined at 10% per annum of the actual cost of such asset or the amount
of rent or charge paid or payable by the employer, as the case may be, as reduced by
the amount, if any, paid or recovered from the employee for such use.

The value of benefit to the employee arising from the transfer of any movable asset
belonging to the employer directly or indirectly to the employee or any member of his
household shall be determined to be the amount representing the actual cost of such
assets to the employer as reduced by the cost of normal wear and tear calculated at the
rate of 10% of such cost for each completed year during which such asset was put to
use by the employer and as further reduced by the amount, if any, paid or recovered
from the employee being the consideration for such transfer:

Provided that in the case of computers and electronic items, the normal wear and tear
would be calculated at the rate of 50% and in the case of motor cars at the rate of 20%
by the reducing balance method.

The value of any other benefit or amenity, service, right or privilege provided by the
employer shall be determined on the basis of cost to the employer under an arms
length transaction as reduced by the employees contribution, if any:

Provided that nothing contained in this clause shall apply to the expenses on
telephones including a mobile phone actually incurred on behalf of the employee by
the employer.

(8) (i) For the purposes of clause (vi) of sub-section (2) of section 17, the fair market value of
any specified security or sweat equity share, being an equity share in a company, on the date on
which the option is exercised by the employee, shall be determined in accordance with the
provisions of clause (ii) or clause (iii).

(ii) In a case where, on the date of the exercising of the option, the share in the company is listed
on a recognized stock exchange, the fair market value shall be the average of the opening price
and closing price of the share on that date on the said stock exchange:
Provided that where, on the date of exercising of the option, the share is listed on more than one
recognized stock exchanges, the fair market value shall be the average of opening price and
closing price of the share on the recognised stock exchange which records the highest volume of
trading in the share:
Provided further that where, on the date of exercising of the option, there is no trading in the
share on any recognized stock exchange, the fair market value shall be
(a) the closing price of the share on any recognised stock exchange on a date closest to the date
of exercising of the option and immediately preceding such date; or
(b) the closing price of the share on a recognised stock exchange, which records the highest
volume of trading in such share, if the closing price, as on the date closest to the date
of exercising of the option and immediately preceding such date, is recorded on more
than one recognized stock exchange.
(iii) In a case where, on the date of exercising of the option, the share in the company is not listed
on a recognised stock exchange, the fair market value shall be such value of the share in the
company as determined by a merchant banker on the specified date.

(iv) For the purpose of this sub-rule,

(a) closing price of a share on a recognised stock exchange on a date shall be the price of the last
settlement on such date on such stock exchange:
Provided that where the stock exchange quotes both buy and sell prices, the closing price shall
be the sell price of the last settlement.
(b) merchant banker means category I merchant banker registered with Security and Exchange
Board of India established under section 3 of the Securities and Exchange Board of
India Act, 1992 (15 of 1992);
(c) opening price of a share on a recognised stock exchange on a date shall be the price of the
first settlement on such date on such stock exchange:
Provided that where the stock exchange quotes both buy and sell prices, the opening price shall
be the sell price of the first settlement.
(d) recognised stock exchange shall have the same meaning assigned to it in clause (f) of section
2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(e) specified date means,
(i) the date of exercising of the option; or
(ii) any date earlier than the date of the exercising of the option, not being a date which is
more than 180 days earlier than the date of the exercising.
(9) For the purposes of clause (vi) of sub-section (2) of section 17, the fair market value of any
specified security, not being an equity share in a company, on the date on which the option is
exercised by the employee, shall be such value as determined by a merchant banker on the
specified date.
Explanation. - For the purposes of this sub-rule, merchant banker and specified date shall have
the meanings assigned to them in sub-clause (b) and sub-clause (e) respectively of clause (iv) of
sub-rule (8).

(10) This rule shall come into force with effect from the 1st day of April, 2009.

Explanation.- For the purposes of this rule-

accommodation includes a house, flat, farm house or part thereof, or accommodation in a

hotel, motel, service apartment, guest house, caravan, mobile home, ship or other
floating structure;

entertainment includes hospitality of any kind and also, expenditure on business gifts other
than free samples of the employers own product with the aim of advertising to the
general public;

hotel includes licensed accommodation in the nature of motel, service apartment or guest
house;
 member of household shall include-

spouse(s),

children and their spouses,

parents, and

servants and dependants;

remote area, for purposes of proviso to this sub-rule means an area that is located at least 40
kilometres away from a town having a population not exceeding 20,000 based on
latest published all-India census;

salary includes the pay, allowances, bonus or commission payable monthly or otherwise or
any monetary payment, by whatever name called from one or more employers, as the
case may be, but does not include the following, namely:-

dearness allowance or dearness pay unless it enters into the computation of

superannuation or retirement benefits of the employee concerned;

employers contribution to the provident fund account of the employee;

allowances which are exempted from payment of tax;

the value of perquisites specified in clause (2) of section 17 of the Income-tax

Act;

any payment or expenditure specifically excluded under proviso to sub-clause (iii)

of clause (2) or proviso to clause (2) of section 17;

lump-sum payments received at the time of termination of service or

superannuation or voluntary retirement, like gratuity, severance pay, leave
encashment, voluntary retrenchment benefits, commutation of pension and
similar payments;

maximum outstanding monthly balance means the aggregate outstanding balance for each
loan as on the last day of each month.

3. After rule 40E of the Income-tax Rules, the following rule shall be inserted, namely:-

40F. Nothing contained in this Part, shall apply, in respect of any assessment for the assessment
year commencing on the 1st day of April, 2010 or any subsequent assessment year.
Note :- The principal rules were published vide notification No. S.O. 969(E) dated the 26th
March, 1962 and last amended by Income-tax (12th Amendment) Rules, 2009 vide notification
No. S.O. 2227(E), dated 02-09-2009.