Perquisites mean any casual emoluments, fees or profit attached to an office in addition to salary and wages. In simple words, it’s a personal advantage. It does not cover a mere reimbursement of any expenditure incidental to the employment.
Like if an employee is provided with a watchman for official use there is no personal advantage to the employee, hence there is no perquisites. If the watchman is provided for personal as well as official use, the value of the perquisites only relating to personal use is taxable. Similarly if the travelling bills for official duties are reimbursed to the employee, there is no advantage to the assesse, so it is not a perquisite.
The perquisites may be in cash or in kind or in the money or money’s worth and also in amenities which are not convertible to the money.
All cash allowance is included in the ordinary meaning of perquisites: - all cash allowance is included and hence taxable under section 17(2) of income tax act. City compensatory allowance, bad climate allowance, shift allowance and incentive bonus are included as perquisites under section 17(2) of income tax act.
A perquisite is taxable as salary only when it is provided by the employer during the continuance of employment: - any perquisites allowed by a person other than employer is taxable as income from other sources. For example tips received by hotel waiters from customers are taxable as income from other sources
Non user of the perquisites by an assesse is of no consequences unless the right to perquisites is foregone before it accrues to him: - there may be circumstances under which the employee may not make use of the perquisites provided by the employer. Where the income is accrued or received but it is subsequently given up, it remain the income of the recipient [CIT vs. Shoorji Vallabhdas and co. (1962) 46 ITR 144 (SC)]. The voluntary forgoing by the employee of the salary due to him is normally a mere application of income and the salary is nonetheless taxable. Unless the assesse forgoes his right of the provision of such perquisites before the income accrues, the notional income has to be brought to charge as perquisites equitant to the value of rent free accommodation [CIT vs. Bawa Singh Chauhan (1984) ITR 8].
Wide scope of the inclusive definition of perquisites: - the definition of the perquisites is inclusive but not limited to them only. The scope of an inclusive definition cannot be restricted only to those words which accrue in definition, but with extend to many other things not mentioned in it. Therefore, any other item not listed in the definition of perquisites will have to be evaluated in accordance with the general and commercial meaning of the word perquisites.
Section 17(2) of income tax perquisites includes.
1- Rent free accommodation under section 17(2) 1
2- Accommodation in concessional rate of rent under section 17(2) 2
3- Any benefit or amenity to the specified employee who is either a director of has a substantial interest in the company or whose income under salaries exceeds Rs. 50000 under section 17(2)3
4- Obligation of the employee paid or reimbursed by the employer under section 17(2)4
5- Any sum payable by the employer to effect an assurance on the life of the assesse or to effect a contract of annuity under section 17(2) 5
6- Prescribed fringe benefits or amenity under section 17(2)6
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