Employee Perks

Employee benefits, also called fringe benefits, perquisites, perqs or perks are various compensations provided to employees other than their normal salaries.

Some of these benefits include housing (employer-provided or employer-paid), group insurance (health, dental, life etc.), disability income protection, retirement benefits, day care for employee children, tuition reimbursement, sick leave, vacation (paid and non-paid), social security, profit sharing, funding of education, and other specialized benefits.

These perks vary from company to company.

Some of these benefits are taxable and as such understanding the tax implications is important.

With the abolishment of the Fringe Benefit Tax, it is back to Perquisite Tax that was present before FBT. However, what are perquisites?

Section 17(2) of the Income-tax Act, 1961 gives an inclusive definition of perquisite. As per this section, perquisite includes:

• The value of rent-free accommodation
• The value of any concession in the matter of rent respecting any accommodation 
• The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases
• By a company to an employee, who is a director thereof
• By a company to an employee being a person who has a substantial interest in the company
• By any employer to an employee whose income under the head 'Salaries' exceeds Rs.24000 excluding the value of non monetary benefits or amenities
• Any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the employee
• Any sum payable by the employer whether directly or through a fund, other than a recognised provident fund or EPF, to affect an assurance on the life of the employee or to affect a contract for an annuity.

Which perquisites are not taxable?

The following are the perquisites that are not taxable:

• Medical facility
• Medical reimbursement (upto Rs. 15, 000)
• Refreshments at work
• Subsidised lunch or dinner provided
• Recreational facilities
• Telephone Bills

Goods sold at a concessional rate - When the employer sells the goods being manufactured by him to his employees at concessional rates, it is not a taxable perquisite. However, if the employer sells other goods to the employees at a value lower than the market value of the goods, the benefit given to the employee is taxable.

• Insurance
• Loans to employees
• Transportation facilities
• Perquisites provided outside India
• Training of employees
• Employers contribution (Pension, deferred annuity scheme and staff group insurance scheme of employees)

With the Financial Bill for 2009, the Finance Minister has removed the fringe benefit tax (FBT) on the value of certain benefits like employee stock options (Esops), sweat equity and superannuation funds given to employees. Now, the tax burden will be borne by the employees. It's not only these three categories but also other perquisites are likely to be taxed.

It has not been made clear as to what perquisites will be taxable, we can only wait and watch as to what other changes the Finance Ministry will implement as a part of this change.

By BankBazaar.com - an online marketplace for your personal loan and home loan needs.