25

INCOME UNDER THE HEAD SALARY

ASSESSMENT YEAR 2024-25 PART-2

“Confidence may not bring success but it gives the power to face any challenge” .

The contribution made by the Central Government in the previous year, to the
Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme
referred to in section 80CCH.

Agnipath Scheme is a Central Government Scheme launched in 2022 for enrolment of Indian
youth in the Indian Armed Forces as Agniveers for four years to serve the country.
In pursuance of the Government's decision to implement the Agnipath Scheme, 2022, the
Competent Authority has decided to create a non-lapsable dedicated Agniveer Corpus Fund in
the interest-bearing section of the Public Account head.

INCOME TAX CA–INTER AY24-25

 26

In this account, fixed percentage of monthly emoluments would be contributed by the

Agniveer and matching amount would be contributed by the Central Government.
The Agniveer Corpus Fund is defined as a Fund in which consolidated contributions of all the
Agniveers and matching contributions of the Government along with interest on these
contributions would be held in their respective accounts.

Central Government’s contribution to Agniveer Corpus Fund account would form part of salary of
employees under section 17(1).
However, while computing total income of an individual enrolled in the Agnipath Scheme, being the
assessee, a deduction under section 80CCH is allowed to the assessee in respect of his contribution as well
as Central Government’s contribution under Agniveer Corpus Fund referred therein. (Deduction under section
80CCH will be discussed in detail in Chapter 6 – “Deductions from Gross Total Income”)

Deduction under section 80CCH(2) in respect of Central Government’s contribution would be available to an
assessee irrespective of the regime under which he pays tax. However, deduction under section 80CCH(1) in
respect of employee’s contribution would be available to an assessee only if he exercises the option of
shifting out of the default tax regime provided under section 115BAC(1A).

Profits in lieu of salary [Section 17(3)]

6] Retrenchment Compensation
The retrenchment compensation means the compensation paid under Industrial Disputes Act, 1947 or under any
Act, Rule, Order or Notification issued under any law. It also includes compensation paid on transfer of employment
under section 25F or closing down of an undertaking under section 25FF of the Industrial Disputes Act, 1947.

Retrenchment Compensation :U/S 10(10B):- Compensation received at the time of retrenchment will be exempt
minimum of the following :-
INCOME TAX CA–INTER AY24-25
 27

i) Actual amount received

ii) Rs.500000 or notified by CG.
iii) Amount as per section 25F Industrial Dispute Act 1947 i.e 15*Average Pay of last 3months*YOS
26
Example:-Mr. X received retrenchment compensation of ₹ 10,00,000 after 30 years 4 months of
service. At the time of retrenchment, he was drawing basic salary ₹ 20,000 p.m.; dearness
allowance ₹ 5,000 p.m. Compute his taxable retrenchment compensation.

Solution-
1]1000000
2]500000
3]15*25000*30=432962Rs Lower will be exempted so exemption is 432962Rs.
26
Note1- The above limits will not be applicable to cases where the compensation is paid under
any scheme approved by the Central Government for giving special protection to workmen under
certain circumstances. Then whole amt. will exempt from tax.

7]Voluntary Retirement Receipts [Section 10(10C)]

Lumpsum payment or otherwise received by an employee at the time of voluntary retirement
would be taxable as “profits in lieu of salary”. However, it would be exempt under section
10(10C), subject to the following conditions:
Compensation received on voluntary Retirement :U/S 10(10C):- Received by an employee of-
A public sector co.,private sector co., Local autority, Authority established by C.G. Or S.G.,university, cooperative
society etc. will be exempt minimum of the following if retirement as per the guidelines issued by the
Government-
i) Actual amount received
ii) Rs 500000
iii) 3* monthly salary[(BS+DA(T)+%Commission on sales)of last month]*completed year of services
iv) Salary last drawn [same As above] * balance months of service left from the date of retirement.

Guidelines issued by the govt.

i) The employee should be completed 10 years of services or 40 years of age.
ii) The scheme has been drawn for overall reduction in the existing strength of the employee.
iii) The vacancy so created is not to be filled up.
iv)Retired employee is not to be employed again in another co. belonging to same management.
v)Employee didn’t avail this exemption of VRS earlier.
vi)It applies to all employees by whatever name called, including workers and executives of
the company or the authority or a cooperative society except directors of a company or a
cooperative society.
vii)Where any relief has been allowed to any assessee under section 89 for any assessment
year in respect of any amount received or receivable on his voluntary retirement or
termination of service or voluntary separation, no exemption under section 10(10C) shall be
allowed to him in relation to that assessment year or any other assessment year.
INCOME TAX CA–INTER AY24-25
 28

[D]Perquisites-

The term ‘perquisite’ indicates some extra benefit in addition to the amount that may be legally due by way of
contract for services rendered. In modern times, the salary package of an employee normally includes monetary
salary and perquisites like housing, car etc.
 Perquisite may be provided in cash or in kind.
 Reimbursement of expenses incurred in the official discharge of duties is not a perquisite.
 Perquisite may arise in the course of employment or in the course of profession. If it arises from
a relationship of employer-employee, then the value of the perquisite is taxable as salary.
However, if it arises during the course of profession, the value of such perquisite is chargeable
as profits and gains of business or profession.
Perquisite will become taxable only if it has a legal origin. An unauthorised advantage taken by an employee
without his employer’s sanction cannot be considered as a perquisite under the Act.

Example: Mr. A, an employee, is given a house by his employer. On 31.3.2024, he is terminated from service,
but he continues to occupy the house without the permission of the employer for six more months after
which he is evicted by the employer. The question arises whether the value of the benefit enjoyed by him
during the six months period can be considered as a perquisite and be charged to salary. It cannot be done
since the relationship of employer- employee ceased to exist after 31.3.2024. However, the definition of
income is wide enough to bring the value of the benefit enjoyed by Mr. A to tax as “income from other
sources”.

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(1) Definition of “Perquisite”

The term “perquisite” is defined under section 17(2). The definition of perquisite is an inclusive one. Based
on the definition, perquisites can be classified in following three ways:

Types of Perquisites

Perquisites taxable in Tax free perquisites in

Perquisites taxable only
the case of all case of all employees
employees in the hands of
specified employees

A]Taxable for all-

S.no. Perquisites Taxability
1 Rent free house- Refer valuation rules[exception RFH provided to judge of HC/SC is not taxable, if
they shift out of 115BAC(1C).]Section 17(2)(i)
2- Concession on rent Refer valuation rules Section 17(2)(ii)
3- Obligation of employee Amount paid by an employer in respect of any obligation which otherwise
met by employer. would have been payable by the employee [Section 17(2)(iv)].
Example: If a domestic servant is engaged by an employee and the employer
reimburses the salary paid to the servant, it becomes an obligation which
the employee would have discharged even if the employer did not reimburse
the same. This perquisite will be covered by section 17(2)(iv) and will be
taxable in the hands of all employees.
4- Amount payable by Amount payable by an employer directly or indirectly to effect an assurance on
an employer directly the life of the assessee or to effect a contract for an annuity, other than
or indirectly to effect payment made to RPF or approved superannuation fund or deposit-linked
an assurance on the insurance fund established under the Coal Mines Provident Fund and
Miscellaneous Provisions Fund, 1948 or Employees’ Provident Fund and
life of the assessee
Miscellaneous Provisions Act, 1952 [Section 17(2)(v)].
However, there are schemes like group annuity scheme, employees state
insurance scheme and fidelity insurance scheme, under which insurance
premium is paid by employer on behalf of the employees. Such payments
are not regarded as perquisite in view of the fact that the employees have
only an expectancy of the benefit in such schemes.
5 Specified security or The value of any specified security or sweat equity shares allotted or
sweat equity shares transferred, directly or indirectly, by the employer or former employer, free of
allotted or cost or at concessional rate to the assessee [Section 17(2)(vi)] [Refer
transferred, by the discussion on valuation of perquisite].
employer
6 Amount or the The amount or aggregate of amounts of any contribution made
aggregate of amount of - in a recognised provident fund
INCOME TAX CA–INTER AY24-25
 30

any contribution made - in NPS referred to in section 80CCD(1)

to the account of the - in an approved superannuation fund
assessee by employer- by the employer to the account of the assessee, to the extent it exceeds `
RPF 7,50,000 [Section 17(2)(vii)].
NPS Refer discussion below
Approved
superanuuation fund
Annual accretion to
the balance at the credit
of the recognised
provident
fund/NPS/approved
superannuation fund
which relates to the
employer’s contribution
and included in total
income (on account of
the same having
exceeded 750000)

7 Any other The value of any other fringe benefit or amenity as may be prescribed by the
CBDT [Section 17(2)(viii)]. Rule 3(7) prescribed the following other benefits or
amenity taxable in case of all the employee.
- Interest free or concessional loan
- Travelling, touring and accommodation
- Free or concessional food and non-alcoholic beverages
- Gift, voucher or token in lieu of such gift
- Credit card expense
- Club expenditure
- Use of movable assets
- Transfer of movable assets
Other benefit or amenity [For valuation, refer discussion on valuation of
perquisite]

Annual accretion to the balance at the credit of the recognised provident fund/NPS/approved
superannuation fund which relates to the employer’s contribution and included in total income (on
account of the same having exceeded ` 7,50,000)
Any annual accretion by way of interest, dividend or any other amount of similar nature during the
previous year to the balance at the credit of the recognized provident fund or NPS or approved
superannuation fund to the extent it relates to the employer’s contribution which is included in total income
in any previous year under section 17(2)(vii) computed in prescribed manner [Section 17(2)(viia)].
In other words, interest, dividend or any other amount of similar nature on the amount which is
included in total income under section 17(2)(vii) would also be treated as a perquisite.
The CBDT has, vide Rule 3B, notified the following manner to compute the annual accretion by way of
interest, dividend or any other amount of similar nature during the previous year-

INCOME TAX CA–INTER AY24-25

 31

TP = (PC/2)*R + (PC1 + TP1)*R

where
TP Taxable perquisite under section 17(2)(viia)for the current previous year
PC Amount or aggregate of amounts of employer’s contribution in excess of
` 7.5 lakh to recognized provident fund, national pension scheme u/s
80CCD and approved superannuation fund during the previous year.

ER Contribution to fund>750000 in current PY.[23-24].

PC1 Amount or aggregate of amounts of employer’s contribution in excess of
` 7.5 lakh to recognized provident fund, national pension scheme u/s 80CCD
and approved superannuation fund for the previous year or years commencing
on or after 1st April, 2020 other than the current previous year.
Aggregate of all Preceding PY ER Contribution to fund>750000 if any. [From PY
2020 till 2023].

TP1 Aggregate of taxable perquisite under section 17(2)(viia) for the previous year
or years commencing on or after 1st April, 2020 other than the current previous
year.
Aggregate of all Preceding PY taxable value of this perquisite, if any.[From PY
2020 till 2023].

R I/ Favg
I Amount or aggregate of amounts of income accrued during the current
previous year in recognized provident fund, national pension scheme u/s
80CCD and approved superannuation fund.
Format for PY 23-24
Balance of Fund as on 31.3.24= 000
Less:EE contr.during current PY= 000
Less:ER contr. During current PY= 000
Less:Fund Balance 1.4.23= 000
This is I= 000
Favg (Amount or aggregate of amounts of balance to the credit of recognized
provident fund, national pension scheme u/s 80CCD and approved
superannuation fund on first day of the current previous year + Amount or
aggregate of amounts of balance to the credit of recognized provident fund,
national pension scheme u/s 80CCD and approved superannuation fund on last
day of the current previous year)/2
Format for PY 23-24-
Total fund balance as on 1-4-23+ Total fund balance as on 31-3-24
2

[Will discuss with example later].

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Exemption in respect of Payment from superannuation funds [Section 10(13)]

Any payment received by any employee from an approved superannuation fund shall be entirely
excluded from his total income if the payment is made
(a) on the death of a beneficiary;
(b) to an employee in lieu or in commutation of an annuity on his retirement at or after a specified age
or on his becoming incapacitated prior to such retirement; or
(c) by way of refund of contribution on the death of a beneficiary; or
(d) by way of contribution to an employee on his leaving the service in connection with which the
fund is established otherwise than by retirement at or after a specified age or his becoming
incapacitated prior to such retirement, to the extent the payment made does not exceed the
contribution made prior to 1-4-1962 and the interest thereon.
(e) by way of transfer to the account of the employee under a pension scheme referred to in
section 80CCD, which is notified by the Central Government.

(B) Tax free perquisites in all cases

The following perquisites

are exempt from tax in the
hands of all employees

S.No. Perquisites Valuation

1 Telephone Telephone provided by an employer to an
employee at his residence
2 Transport Facility Transport facility provided by an employer engaged
in the business of carrying of passengers or goods to
his employees either free of charge or at
concessional rate;
3 Privilege passes and privilege ticket Privilege passes and privilege ticket orders
granted by Indian Railways to its employees;
4 Perquisites allowed outside India by Perquisites allowed outside India by the Government
the Government to a citizen of India for rendering services outside
India;
5 Employer’s contribution to staff group Employer’s contribution to staff group insurance

INCOME TAX CA–INTER AY24-25

 33

insurance scheme; scheme;

6 Annual premium by employer on Payment of annual premium by employer on
personal accident policy personal accident policy effected by him on the life
of the employee
7 Refreshment Refreshment provided to all employees during
working hours in office premises;
8 Subsidized lunch Subsidized lunch provided to an employee during
working hours at office or business premises
provided the value of such meal is upto ` 50;This
exemption is available only employee shift out of
115BAC(1A).
9 Recreational facilities Recreational facilities, including club facilities,
extended to employees in general i.e., not restricted
to a few select employees
10 Amount spent on training of employees Amount spent by the employer on training of
employees or amount paid for refresher management
course including expenses on boarding and lodging
11 Sum payable by employer to a Sum payable by an employer to a RPF or an approved
RPF or an approved superannuation superannuation fund or deposit- linked insurance
fund fund established under the Coal Mines Provident
Fund and Miscellaneous provisions Act, 1948 or the
Employees’ Provident Fund and Miscellaneous
Provisions Act, 1952 upto the limit prescribed
12 Leave travel concession Leave travel concession, This exemption is available
only employee shift out of 115BAC(1A).subject to the
conditions specified under section 10 (discussed
below)
Note: Value of Leave travel concession provided to
the High Court judge or the Supreme Court Judge
and members of his family are completely exempt
without any conditions. This exemption is available
only employee shift out of 115BAC(1A).
13 Medical facilities Medical facilities subject to certain prescribed
limits;
14 Rent-free official residence Rent-free official residence provided to a Judge of a
High Court or the Supreme Court. This exemption is
available only employee shift out of 115BAC(1A).
15 Conveyance facility Conveyance facility provided to High Court Judges
under section 22B of the High Court Judges
(Conditions of Service) Act, 1954 and Supreme Court
Judges under section 23A of the Supreme Court
Judges (Conditions of Service) Act, 1958

INCOME TAX CA–INTER AY24-25

 34

Point 12 from above table]Leave Travel Concession in India U/s 10(5)-LTC received by employee for himself or
for his family from his employer for proceeding to any place in India-
i) On leave
ii) On retirement or termination
is exempt from tax as per rule 2B-

This exemption is available only if employee shift out of 115BAC(1A).

Note -1-Family means-Spouse and children of individual (Dependent or not) & dependent parents, Brother &
sister.

Note-2-From 1-10-98 the exemption shall be available only in respect of two children .But in case of children born
before 1-10-98 this restriction is not applicable.

Note-3-The exemption under this section shall be available to an individual in respect of 2 journey perform in a
block of 4 calendar years starting from 1986 calendar year.

Note-4- Where such LTC is not availed by an individual during any block of 4 years then exemption can be claimed
in the first calendar year of the next block only for in respect of one journey.

As per rule 2B following amount is exempted-

A] In case journey performed by Air-
Amount of air economy fare of the national carrier by shortest route or amount spent whichever is lower.

B] In case journey performed by any other mode-

1] In case Train services available-

Amount of AC first class rail by shortest route or amount spent whichever is lower.

3]In case place of origin of journey & place of destination of journey is not connected by train-

i) Where recognized public transport exist-

First class or deluxe class fare by shortest route or am. spent whichever is lower.

ii) Where recognized public transport does not exist -

AC first class train fare by shortest route for such distance or am. Spent whichever is lower.

Point 13 from above table] Valuation of Medical Facility: Proviso to section 17(2)-Followings are not taxable in
the hands of employee-

1] Medical facility provided in a hospital/clinic etc. maintained by employer.

2] Reimbursement of expn. Incurred by employee on medical treatment-

a] In any hospital maintained by the Govt. ,local authority, or any approved hospital by govt.
INCOME TAX CA–INTER AY24-25
 35

b] In respect of prescribed diseases in any hospital approved by Chief Commissioner or Principal Chief
Commissioner.
c] in respect of any illness relating to COVID-19 subject to conditions notified by the Central
Government
However, in order to claim the above benefit in case of prescribed disease, the employee shall attach
with his return of income a certificate from the hospital specifying the disease or ailment for which
medical treatment was required and the receipt for the amount paid to the hospital.
Thus, the two types of facilities are covered:
A]payment by the employer for treatment in a Government hospital and
B]payment by an employer for treatment of prescribed diseases in any hospital approved by the
principal Chief Commissioner or Chief Commissioner.

3] Premium paid to effect an insurance on the health of employee: Any premium paid by an employer
in relation to an employee to effect an insurance on the health of such employee. However, any such
scheme should be approved by the Central Government or the Insurance Regulatory Development
Authority (IRDA) for the purposes of section 36(1)(ib).

4]Reimbursement of premium paid to effect an insurance on the health of employee or for the family
of an employee: Any sum paid by the employer in respect of any premium paid by the employee to
effect an insurance on his health or the health of any member of his family under any scheme approved by
the Central Government or the Insurance Regulatory Development Authority (IRDA) for the purposes of
section 80D.

5] Reimbursement of expn. Incurred by the employee on medical incurred by the employee on medical
treatment from any Private Doctor is full taxable.

6]Any expn. Incurred by employer on-

a] Medical treatment outside India.

b] Travel & Stay abroad of employee & one attendant.

However the expn. On travel will be taxable if the GTI before including such expn. >2lacs Rs.
The perquisite element in respect of expenditure on medical treatment and stay abroad will be exempt
only to the extent permitted by the RBI.
Note- Medical facility to employee & member to his family includes Spouse, Children
(Dependent/Independent /married /unmarried) but dependent parents, brothers, sisters in all the
above cases Hospital includes a dispensary or a clinic or a nursing home.

7]Payment of premium on personal accident insurance policies

If an employer takes personal accident insurance policies on the life of employees and pays the insurance
premium, no immediate benefit would become payable and benefit will accrue at a future date only if
certain events take place.
Moreover, the employers would be taking such policy in their business interest only, so as to indemnify
INCOME TAX CA–INTER AY24-25
 36

themselves from payment of any compensation. Therefore, the premium so paid will not constitute a
taxable perquisite in the employees’ hands‡.

[C] Perquisites taxable only in the hands of specified employees [Section 17(2)(iii)]
Any monetary obligation of the employee which is discharged by the employer is perquisite in the hands of
all employees as per section 17(2)(iv). However, sometimes instead of discharging employee’s obligation,
employer provides perquisites in the form of facility to the employee. Such perquisites are taxable in the
hands of specified employees only.
The value of any benefit or amenity granted or provided free of cost or at concessional rate which have not
been included in (A) & (B) above will be taxable in the hands of specified employees. Followings are the
example of such services:
Provision of sweeper, gardener, watchman or personal attendant
Facility of use of gas, electricity or water supplied by employer
Free or concessional tickets
Use of motor car
Free or concessional educational facilities
For valuation of such perquisites, refer discussion on valuation of perquisite.

Specified Employee: Means an employee who satisfy any one of the following conditions:-
1] Employee & Director of the Co.
2] Employee who has substantial interest in the Co. [having >= 20% voting power].
3] Employee whose Monetary Salary is Exceeding 50000Rs.during the P/Y from one or more employer.

MONETARY SALARY WILL BE COMPUTED AS FOLLOWS:-

BASIC SALARY M
ALL MONETRY PAYMENTS (TAXABLE PORTION) M
GROSS SALARY
LESS: DEDUCTION U/S 16
(i)Both Regime
(ii)If shifting out from 115BAC(1A).
(iii) If shifting out from 115BAC(1A).
MONETARY SALARY 000

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Perquisite –Valuation of perquisite-

Valuation of different Perquisites-

1-Rent Free House
2-Motor Car
3-Other Automotive
4- Valuation o f benefit of
provision of domestic servants
[Sub-rule (3) of Rule 3]
5-] Valuation of gas,
electricity or water
supplied by employer
[Sub-rule (4) of Rule 3]
6-Others

1]RENT FREE HOUSE PERQUISITE/VALUATION OF RESIDENTIAL ACCOMMODATION [SUB RULE (1) OF RULE 3]-

Calculation of
Unfurnished
accommodation
provided to an
employee :-

INCOME TAX CA–INTER AY24-25

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CASE1- In case of CG Or SG employees–

Taxable value of perquisite= License fee/Rent as per govt. rules as reduced by the rent actually paid by employee.

CASE2- In case of other employees

Nature of accommodation Accommodation provided Accommodation provided In any other city
in a city having population in a city having population
>25lacs as per 2001 census >10lacs –up to 25lacs as
per 2001 census
If house is owned by the 15% of salary during the 10% of salary during the 7.5% of salary during the
Employer period house is occupied. period house is occupied. period house is occupied.
If house is on lease/rent 15% of salary during the 15% of salary during the 15% of salary during the
by the Employer period house is occupied period house is occupied period house is occupied
or Rent paid whichever is or Rent paid whichever is or Rent paid whichever is
lower. lower. lower.
Note1- Salary includes all monetary payments but, in case of allowance D.A. only that part which is for retirements benefits.
And Advance Salary and Arrear of Salary will not be included.

Note2-Salary to be commuted on due basis for d period for which rental accommodation is occupied by d employee.

Note3- Where employee received salary from more than one employer than aggregate salary will be taken.

CASE-3-Value of furnished house:- (In case of Govt. & All other employees)
Value as the house is unfurnished As per Case A Or Case B
Add1) For owned furniture-10% p.a.of original cost of furniture (furniture includes all home appliance)
2) For hired furniture- Actual hiring charge.

CASE-4-Value of accommodation provided in a hotel by Govt. or other- Taxable value will be minimum of following-
i) 24% of salary paid or payable for the year.[Proportionate for number of days stay]
ii) Actual charges paid to hotel.
However nothing will be taxable if following conditions are satisfied-
i) Accommodation is provided for a period not exceeding 15 days and
ii) Provided on transfer from one place to another.
Clarification- In above case (i) firstly calculated 24% of the salary for whole year n then calculated for the period for which
hotel is occupied proportionately on the basis of days.

CASE-5- Accommodation in both city simultaneously-Where on account of transfer from one place to another, employee
has been provided a house at new place of posting while retaining the house at other place then the value shall be with
reference to one house which has lower value for a period of 90 days.
Thereafter the value of both houses would be taxable.

Note- Nothing for rent free house is taxable if following conditions are satisfied-
i) The house is located in a remote area and
ii) It is provided to an employee working at mining site.

Note-(Remote area- an area, which is 40km away from a town having a population not exceeding 20000).

General Note:- Any amount recovered or received in respect of ANY perquisite including RFH will be reduced from the
Taxable value as calculated above.
INCOME TAX CA–INTER AY24-25
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Taxability -
2]Motor Car [Sub-rule
(2) of Rule 3]

If motor car is provided by the employer to the employee, it will be perquisite in the hands of specified employees
only. However, the use of any vehicle provided by a company or an employer for journey by the assessee from his
residence to his office or other place of work, or from such office or place to his residence shall not be regarded as a
benefit given or provided to him free of cost or at concessional rate. [Explanation below section 17(2)(iii)]
But if the motor car is owned by the employee and used by him or members of his family wholly for personal purpose
and for which employer reimburses the running and maintenance expenses of the car, it will be perquisite in the hands of all
employees.
The value of perquisite by way of use of motor car to an employee by an employer shall be determined in the
following manner –

1.CAR- TAXABLE IN THE HANDS OF ALL EMPLOYEE-

Description Value
1.Where CAR is owned by EE
a) Expn met by EE NIL
b)Expn. met by ER-
i)If CAR used for official purpose only. NIL
ii)If CAR used for Private purpose only. Actual Expn. 000
Less:Amount received from EE (if) 000
Taxable Value 000

iii)If CAR used for Official n Private both. Actual Expn. 000
Less:if car upto1600 cc 1800PM
If car > 1600 cc 2400PM
If Driver provided 900PM

Or
Actual Expn. for official purpose
Whichever is higher.
Less:Amount received from EE (if) 000

Description- TAXABLE ONLY IN THE HANDS OF SPECIFIED Value

EMPLOYEE.
1.Where CAR is owned or Hired by ER
a) Expn met by EE-

INCOME TAX CA–INTER AY24-25

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i)If CAR used for official purpose only. NIL

ii)If CAR used for Private purpose only. 10% Actual Cost or Rent as the case may be 000
Add: Driver’s Salary if provided 000
Less:Amount received from EE (if) 000
Taxable Value 000
iii)If CAR used for Official n Private both. if car upto1600 cc 600PM
If car > 1600 cc 900PM
If Driver provided 900PM
Note-Fixed Taxable even some amount recovered from
employee.
b)Expn. met by ER-
i)If CAR used for official purpose only. NIL
ii)If CAR used for Private purpose only. Actula Expn. including Driver’s salary (if) 000
Add:10% of Actual Value or Rent (as case) 000
Taxable Value 000
Les: Amount recovered from EE(if) 000
Taxable 000
iii)If CAR used for Official n Private both. if car upto1600 cc 1800PM
If car > 1600 cc 2400PM
If Driver provided 900PM
Note-Fixed Taxable even some amount recovered from
employee.

2.OTHER AUTOMATIVE CONVEYANCE- TAXABLE IN THE HANDS OF ALL EMPLOYEE-

Description Value
1.Owned by EE
a) Expn met by EE NIL
b)Expn. met by ER-
i)If used for official purpose only. NIL
ii)If used for Official n Private both. Actual Expn. 000
Less: 900PM
Or
Actual Expn. for official purpose
Whichever is higher.
Less:Amount received from EE (if) 000

Notes-
1.Month means completed month.
2.When more than one MOTOR CAR is provided-
A]One car any one taxable as used for both Private or Official.
B]Others car as only for Private.

INCOME TAX CA–INTER AY24-25

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In this case first of all we need to treat all cars once as Full Private and once as used for both official & private and then
need to make combination and the combination results in lowest taxable value will be opt.

3]Valuation of benefit of provision of domestic servants [Sub-rule (3) of Rule 3]

If servants are engaged by the employee and employer paid or reimbursed the employee for the wages of such
servants, it will be perquisite in the hands of all employees. But if the domestic servants are engaged by the
employer and facility of such servants is provided to the employee, it will be perquisite in the hands of specified
employees only.
The value of benefit to the employee or any member of his household resulting from the provision by the employer
of the 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]Valuation of gas, electricity or water supplied by employer [Sub-rule (4) of Rule 3]

If gas, electricity or water connections are taken by the employee and employer paid or
reimbursed the employee for such expenses, it will be perquisite in the hands of all employees. But
if the gas, electricity or water connections are taken in the name of employer and facility of such
supplies are provided to the employee, it will be perquisite in the hands of specified employees only.
The value of benefit to the employee resulting from the provision of gas, electricity or water
supplied by the employer shall be determined as follow:

Circumstances Value of benefit

If payment is made to agency sum equal to the amount paid on that
supplying of gas, electricity etc. account by the employer to the agency
supplying the gas, electric energy or water

If supply is made from resources manufacturing cost per unit incurred by the
owned by the employer 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]Valuation of free or concessional educational facilities [Sub-rule (5) of Rule 3]

If school fees of children of employee or any member of employee’s household is paid or reimbursed
by the employer on employee’s behalf, it will be perquisite in the hands of all employees. But if the
education facility is provided in the school maintained by the employer or in any school by reason of his
being employment at
free of cost or at concessional rate, it would be perquisite in the hands of specified employees only. The value of benefit
to the employee resulting from the provision of free or concessional educational facility for any member of his
household shall be determined as follow:

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Circumstances Value of benefit

If the educational institution is cost of such education in a similar
maintained and owned by the employer institution in or near the locality.
However, there would be no perquisite if
If free educational facilities are allowed in
the cost of such education or the value of
any other educational institution by
such benefit per child does not exceed `
reason of his being in employment of
1,000 p.m.
that employer

Others amount of expenditure incurred by the

employer in that behalf

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.
Note: The exemption of ` 1,000 p.m is allowed only in case of education facility provided to the
children of the employee not in case of education facility provided to other household members.

6]Free or concessional tickets [Sub-rule (6) of Rule 3]

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.
However, there would be no such perquisite to the employees of an airline or the railways.

7]Valuation of other fringe benefits and amenities [Sub-rule (7) of Rule 3]

Section 17(2)(viii) provides that the value of any other fringe benefit or amenity as may be prescribed
would be included in the definition of perquisite and taxable in the hands of all employees. Accordingly,
the following other fringe benefits or amenities are prescribed and the value thereof shall be
determined in the manner provided hereunder:-
(i) Interest-free or concessional loan [Sub-rule 7(i) of Rule 3]
(a) 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, 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.
“Maximum outstanding monthly balance” means the aggregate outstanding
balance for each loan as on the last day of each month.
INCOME TAX CA–INTER AY24-25
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(b) However, no value would be charged if such loans are made available for
medical treatment in respect of prescribed diseases (like cancer, tuberculosis,
etc.) or where the amount of loans are not exceeding in the aggregate ` 20,000.
(c) Further, 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.

8]Valuation of traveling ,touring & accommodation :- Taxability are as under-

SITUATIONS TAXABLE VALUE
TRAVEL- Value at which such facilities are offered by other
1] Where such facility is not given to all employee. agencies to the public.[FMV]
2] Where such facility is given to all employee. Actual expn. Borne by employer.[Actual Expn.]

TOUR-
1] If employee is on an official tour & expenses are Actual expenditure of the member of his household.
incurred in respect of any member of his household
accompanying him. Expenses incurred in relation to such extended period
2] Where any official tour is extended as a vacation. of stay.

9]Free or concessional food and non-alcoholic beverages [Sub-rule 7(iii) of Rule 3]

Situations Taxable Value

1] Tea/snacks provided during office hours. NIL
2]Free meals during working hours provided in a NIL
remote area. NIL if the value of voucher is upto Rs50 per meal.
3]Free meals provided by employer during office (exemption would not be available in case of
hours at office premises or through paid vouchers an employee, being an assessee, who opts for
which are non transferable. the provisions of section 115BAC),
4]In any other case.[Bill base reimbursement] Actual amount of expenditure incurred by ER.

10] Value of gift,voucher or token in lieu of such gift [Sub-rule 7(iv) of Rule 3]
A]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:
B]However, if the value of such gift, voucher or token, as the case may be, is below ` 5,000 in the
aggregate during the previous year, the value of perquisite shall be taken as ‘Nil’.

11]Credit card expenses [Sub-rule 7(v) of Rule 3]

A]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 card (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.

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B]However, such expenses incurred wholly and exclusively for official purposes would not be
treated as a perquisite if the following conditions are fulfilled.

i)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;
ii)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.

12]Club expenditure [Sub-rule 7(vi) of Rule 3]

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 a 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.

However, 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.

B]Further, if such expenditure is incurred wholly and exclusively for business purposes, it would not be treated as
a perquisite provided the following conditions are fulfilled:-

i)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;

ii)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.

There would be no perquisite for use of health club, sports and similar facilities provided uniformly to all
employees by the employer.

13]Valuation of use of movable asset:- Taxable value are as under-

Situation Taxable Value
1] Use of any movable asset by the employee or any
member of his house hold-
a) Laptop & Computers----------------------------------- NIL[always]
b) CAR & other assets specified in rules------------ Refer CAR & other ruels.
c)Other Movable Assets---------------------------------- 10% P.a. of the actual cost of asset or amount of rent
paid by the employer.

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14]Valuation of transfer of any movable asset:- Taxable value will be as under:-

Situation Taxable Value
1] Computers & Electronic items. Actual cost of such asset minus 50% of the cost for
{Means data storage devices like digital diries,printers each completed year during which such asset was put
etc,not TV,Fridge etc.} to use by the employer, on Reducing Balance
method.
2]Motor Cars
Actual cost of such asset minus 20% of the cost for
each completed year during which such asset was put
to use by the employer, on Reducing Balance
method.
3] Any other assets Actual cost of such asset minus10% of the cost for
each completed year during which such asset was put
to use by the employer, on SLM method.

15]Valuation of specified security or sweat equity share for the purpose of section 17(2)(vi) [Sub-rule (8)]
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 the following manner -

If shares are listed on recognized stock exchange - 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

If shares are listed on more than one recognized stock exchange - However, 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.

If no trading in share on recognized stock exchange -Further, 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.

“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.
However, where the stock exchange quotes both “buy” and “sell” prices, the closing price shall be the
“sell” price of the last settlement.
“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.

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However, where the stock exchange quotes both “buy” and “sell” prices, the opening price shall
be the “sell” price of the first settlement.

(1) If shares are not listed on recognized stock exchange - 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.
For this purpose, “specified date” means,—
(i) the date of exercising of the option; or 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.
Note: Where any amount has been recovered from the employee, the same shall be deducted to arrive at
the value of perquisites.

16]Valuation of specified security, not being an equity share in a company for the purpose of
section 17(2)(vi) [Sub-rule (9)]

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.
For this purpose, “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.
Tax on perquisite of specified securities and sweat equity shares is required to be paid in the year of
exercising of option. However, where such shares or securities are allotted by the current employer,
being an eligible start-up§, the perquisite is taxable in the year
- after the expiry of 48 months from the end of the relevant assessment year
- in which sale of such security or share are made by the assessee
in which the assessee ceases to be the employee of the employer, whichever is earlier.

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DEDUCTIONS FROM SALARY

The income chargeable under the head ‘Salaries’ is computed after making the following
deductions:
(1) Standard deduction [Section 16(ia)]-Deduction available under both regime.
(2) Entertainment allowance [Section 16(ii)]- If shifting out from 115BAC(1A).
(3) Professional tax [Section 16(iii)]- If shifting out from 115BAC(1A).

STANDARD DEDUCTION [U/S 16]:-

Salary Income before giving Standard deduction i.e. after Amount of Standard Deduction
professional tax & Entertain. All. Ded.
Gross Salary Gross Salary or 50000Rs.)lower As Deduction.
Deduction available under both regime.
Entertainment Allowance Deduction [U/S 16(ii)]:- Ded. Is available only for Central & State Govt. Employees.
Actual Spent amount is irrelevant for deduction purpose. Ded. Will be minimum of following :- If shifting out from
115BAC(1A).
1] Actual amount
2] 20% of BASIC SALARY
3] Rs.5000

Professional Tax. [U/S 16(iii)]:- Employment/professional tax will be allowed as ded in the year in which it’s paid.If this tax
is paid by employer for employee than first it will be included in the Salary as Perquisite & thereafter it is allowed as ded
u/s16(iii). If shifting out from 115BAC(1A).

RELIEF UNDER SECTION 89

(1) On account of arrears of salary or advance salary: Where by reason of any portion of an
assessee’s salary being paid in arrears or in advance or by reason of his having received in any
one financial year, salary for more than twelve months or a payment of profit in lieu of salary
under section 17(3), his income is assessed at a rate higher than that at which it would
otherwise have been assessed, the Assessing Officer shall, on an application made to him in
this behalf, grant such relief as prescribed. The procedure for computing the relief is given in
Rule 21A.

(2) On account of family pension: Similar tax relief is extended to assessees who receive arrears of family
pension as defined in the Explanation to clause (iia) of section 57.
“Family pension” means a regular monthly amount payable by the employer to a person belonging to the family
of an employee in the event of his death.

(3) No relief at the time of Voluntary retirement or termination of service: No relief shall be granted in respect of
any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in
accordance with any scheme or schemes of voluntary retirement or a scheme of voluntary separation (in the case
of a public sector company), if exemption under section 10(10C) in respect of such compensation received on
voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee in
respect of the same assessment year or any other assessment year.
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INCOME TAX CA–INTER AY24-25