Perquisites and TDS on Salary — Section 17 and Section 192 Compliance for Employers

Perquisites are non-monetary benefits provided by employers to employees — company cars, rent-free accommodation, club memberships, gifts, ESOP benefits and more. Under Section 17(2) of the Income Tax Act, these perquisites are part of an employee's salary income and are taxable. Employers must deduct TDS on the total salary including the value of perquisites under Section 192. Here is the complete guide.

What are Perquisites Under Section 17(2)?

Perquisites include:

• Rent-free accommodation or accommodation at concessional rate provided by employer
• Company car — for personal use or partly personal use
• Free or concessional education for employee's children at the employer's school
• Club membership fees paid by employer for personal use
• ESOP — difference between FMV on exercise date and exercise price (taxed as perquisite at exercise)
• Interest-free or concessional loans above ₹20,000 from employer
• Free/concessional domestic servant or gardener
• Medical benefits above specified limits
• Travel expenses for personal trips

Exempt Perquisites (Not Taxable)

• Medical treatment in government hospital / hospital of employer — exempt
• LTA (Leave Travel Allowance) — exempt twice in a 4-year block (conditions apply)
• Food coupons/meal vouchers up to ₹50 per meal (2 meals a day) — exempt
• Mobile phone and laptop provided for official use — exempt
• Gifts up to ₹5,000 per year — exempt
• Uniform expenses for official use — exempt

Valuation of Perquisites

Taxable perquisites are valued as per Rule 3 of the Income Tax Rules:

• Rent-free accommodation: For government employees — licence fee; for others — 15%/10% of salary based on population of city (25% for unfurnished, 15% for furnished adjustments)
• Company car: ₹1,800/month (engine up to 1600cc) + ₹900 if chauffeur provided; ₹2,400/month (engine above 1600cc) + ₹900 if chauffeur

Section 192 — TDS on Salary

Employers must deduct TDS on the aggregate salary (including perquisites) based on the tax rate applicable to the employee's total estimated income for the year. TDS is deducted each month and deposited by the 7th of the following month. Form 16 (TDS certificate) is issued annually before June 15 for the previous financial year.

Conclusion

Perquisite taxation is a complex area requiring employer attention — correct valuation and TDS deduction under Section 192 is essential to avoid shortfall notices. SPOTON provides payroll tax advisory, perquisite valuation and Form 16 preparation for employers across Kerala. Contact us for expert salary TDS compliance services.