Tax & Regulatory Services
Revised Valuation Rules
for Perquisites
The Finance (No. 2) Act, 2009, has withdrawn the levy of Fringe
Benefit Tax (“FBT”) on expenditure incurred by an employer on or
after 1 April, 2009. Consequently, the employee benefits which were
subject to FBT have been brought back within the ambit of
perquisites and are taxable in the hands of employees from the
financial year (“FY”) 2009-10 onwards.
CBDT has notified via its Notification No.
94/2009/F.No.142/25/2009-S O (TPL), Rule 3 of the Income-tax
Rules,1962 has been substituted completely and it is deemed to
have come into force from 1st day of April 2009.
The new Rule 3 specifies the main changes under following
categories:
•Perquisites for Residential Accommodation provided by the
employer,
•Valuation of motor car provided by an employer
•Perquisites for Employee Stock Options.
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Accommodation
Definition of ‘salary’ under the Rules has been expanded to include also lump-sum payments received at the time of
termination of service or superannuation or voluntary retirement. So, payments like gratuity, severance pay, leave
encashment, voluntary retrenchment benefits, commutation of pension and similar payments would also now have to be
considered in determining the value of the housing perquisites provided by the employer.
Valuation of Accommodation
S.No Circumstances Where accommodation is unfurnished Where accommodation is
furnished
(1) (2) (3) (4)
1) Provided by Central Govt. or License fees determined by the respective Value in Col (3) and
any state Govt. government in respect of accommodation, increased by 10% p.a. of the
as reduced by the rent actually paid by the cost of furniture or if
employee. furniture hired, then actual
hire charges payable, less
any charges paid by
employee.
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2) Accommodation provided by
any other employer-
a) Owned by the employer. Based on population as per 2001 census- Value in Col (3) and increased by 10%
(i)15% of Salary > 25 lakhs p.a. of the cost of furniture or if furniture
(ii)10% of Salary >10 lakh but < 25 lakhs. hired, then actual hire charges payable,
(iii)7.5% of Salary in other areas. less any charges paid by employee.
For the period accommodation was
occupied by the employee during the PY,
as reduced by the rent paid by employee.
b) Accommodation is taken on Actual rent paid or payable by employee Value in Col (3) and increased by 10%
lease or rent by the employer. or 15% of salary whichever is lower , p.a. of the cost of furniture or if furniture
reduced by the rent if any paid by the hired, then actual hire charges payable,
employee. less any charges paid by employee.
NA
3) Where the accommodation is 24% of Salary paid or payable or actual
provided under (1) and (2) in a NA charges of hotel , which ever is lower,
hotel (except where employee for the period during which such
is provided for period not accommodation is provided as reduced
exceeding 15 days under a by rent if any paid or payable by the
transfer.) employee.
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Valuation of Motor Car
I. If Motor Car is Owned or hired by employer & running and maintenance expenses are incurred
or reimbursed by Employer
Usage Purpose Perk Value
Official purposes only No perquisite, if specified conditions satisfied.
Private purposes of the employee or any member of Actual expense incurred by employer
his household Add: 10% p.a of Actual Cost of Car or Hire charges of Car
Add: Salary to Driver
Less: amount recovered from employee
Partly Official & partly Private purposes of his own Upto 1600CC : Rs 1,800 p.m
or any member of his household. Above 1600CC : Rs. 2,400 p.m
Add: If driver provided : Rs.900 p.m
Less: amount recovered from employee
II. If Motor Car is Owned by employee & running and maintenance expenses are incurred or reimbursed by Employer
Usage Purpose Perk Value
Official purposes only No perquisite, if specified conditions satisfied.
Partly Official & partly Private purposes Actual expense incurred by employer
Less: amount recovered from employee
Less: Upto 1600CC : Rs. 1,800 p.m
Above 1600CC : Rs. 2,400 p.m
Less: If driver provided : Rs.900 p.m
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III. If Motor Car is Owned by employer & running and maintenance expenses are incurred by Employee
Usage Purpose Perk Value
Official purposes only No perquisite, if specified conditions satisfied.
Private purposes only 10% p.a of Actual Cost of Car or Hire charges of Car
Add: Salary to Driver (if paid by employer)
Less: amount recovered from employee
Partly Official & partly Private purposes. Upto 1600CC : Rs 600 p.m
Above 1600CC : Rs 900 p.m
Add: If driver provided : Rs.900 p.m
Less: amount recovered from employee
IV. If Any other Automotive Conveyance is Owned by employee & running and maintenance expenses are incurred or reimbursed
by Employer
Usage Purpose Perk Value
Official purposes only No perquisite, if specified conditions satisfied.
Partly Official & partly Private purposes. Actual expenditure incurred by employer
Less: amount recovered from employee
Less: Amount for Official use Rs.900 p.m
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Employee Stock Option
For Listed equities
Perk Value of listed sweat equity Shares allotted or transferred free of cost or at concessional rate shall be average of
opening and closing price of shares listed on stock exchange on date of exercise of option less any amount recovered
from the employee.
For unlisted equities
Perk Value of unlisted sweat equity shares and other Security allotted or transferred free of cost or at concessional rates
shall be the fair market value as determined by the category-I Merchant Banker on the date of exercise of Option or any
earlier date, not being earlier than 180 days than the date of exercising, less amount recovered from the employee.
Conclusion
Employers will have to determine the tax implications for the employees for April to November, 2009, and will have to
adjust the shortfall/excess of taxes from future salary payments.
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