Sometimes employer gives the assets to employees for personal use and it is considered as perquisite under income tax act as it added benefit to employee other than normal compensation which he receive during the normal course of employment.
Only that asset will be taxed which is used for the personal purpose and if that asset is used during the course of employment for fulfilling this duties to employer than it will not be taxed under income tax act, 1961.
There are different categories of asset and taxability depends on the ownership of those assets by employer, if assets are owned by employer than 10% of cost of asset is taxed as perquisite less any amount recovered from employee by employer.
If asset is taken on hire than actual cost of hire will be taxed as perquisite under income tax act less any amount recovered from employee by employer.
Asset owned by employer:
10% of cost of asset
Less: any amount recovered from employer
| If positive = perquisite |
Asset hired by employer:
Actual hire charges
Less: any amount recovered from employer
| If positive = perquisite |
Note:
- If employer has provided laptop and computer to use then tax free perquisite
- Use of movable asset can be used by employer or his house holder member
- Calculation will be made for the period for which asset is used by employer
- This provision is not applicable to asset which have some specified rules
Reference:
As Per Section 17(2) (viii) & Rule 3(7) (vii), Of the Income Tax Act, 1961-
17. For the purposes of sections 15 and 16 and of this section,—
(2) “perquisite” includes—
(viii) the value of any other fringe benefit or amenity as may be prescribed
Provided that nothing in this clause shall apply to,—
(i) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;
(ii) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family—
(a) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees;
(b) in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to the prescribed guidelines:
Provided that, in a case falling in sub-clause (b), 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;
(iii) any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government [or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),] for the purposes of clause (ib) of sub-section (1) of section 36;
(iv) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force 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 and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),] for the purposes of section 80D;
(v) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family [other than the treatment referred to in clauses (i) and (ii)]; so, however, that such sum does not exceed [fifteen] thousand rupees in the previous year;
(vi) any expenditure incurred by the employer on—
- medical treatment of the employee, or any member of the family of such employee, outside India;
- travel [and] stay abroad of the employee or any member of the family of such employee for medical treatment;
- travel and stay abroad of one attendant who accompanies the patient in connection with such treatment,
[subject to the condition that—
(A) the expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of India; and
(B) the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees;]
(vii) any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause :
[Provided further that for the assessment year beginning on the 1st day of April, 2002, nothing contained in this clause shall apply to any employee whose income under the head “Salaries” (whether due from, or paid or allowed by, one or more employers) exclusive of the value of all perquisites not provided for by way of monetary payment, does not exceed one lakh rupees.]
Explanation:
For the purposes of clause (2),—
(i) “hospital” includes a dispensary or a clinic [or a nursing home];
(ii) “family”, in relation to an individual, shall have the same meaning as in clause (5) of section 10; and
(iii) “gross total income” shall have the same meaning as in clause (5) of section 80B;]
Rule 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,—
(7). In terms of provisions contained in sub-clause (viii) of clause (2) of section 17, the following other benefits or amenities and value thereof shall be determined in the manner provided hereunder: interest-free or concessional loan, value of travelling expenses for any holiday, value of free food, value of any gift or voucher, etc.
(vii). 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 cent 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.