I fall in the 30 per cent tax bracket, staying in company-provided quarters, claiming electricity, fuel allowance (with actual bills) from the company. My company deducts income tax by calculating these as perquisites. Are these perquisites taxable or not? Somebody deducts these from their income and claims tax refund. Is that right? Kindly clarify.
A. Raja
According to the Income Tax Act, 1961 (the Act), rent-free accommodation and any benefit or amenity provided by an employer at no cost or at a concessional rate are classified as perquisites and are taxable under the head ‘Salaries’.
We note that you receive reimbursements for fuel and electricity expenses after submitting the relevant bills to the company. These reimbursements are also considered taxable perquisites by the company.
If any amount is recovered from you, it should be deducted from the taxable value of the perquisite, with the remaining benefit being subject to tax in your hands. Consequently, these perquisites must be included in your gross income, and your employer should accordingly deduct tax at source to be in compliance with the provisions of the Act.
The author is a practicing chartered accountant