The New Budget has raised issues regarding the Taxation of perquisites. We have tried to clear the definition of PERQUISITES under the Income Tax Act as a thin line exists between the Allowance and Perquisite and this has caused a lot of confusion in the minds of salaried individuals.

Firstly let us delve into the allowances as per the Income Tax Act and Rules. The following are allowances and do not come under the purview of perquisites:

These are allowances and cannot be treated as a perquisite.

On the other hand the company may be paying certain amounts as reimbursements, which are against actual expenses incurred by the employee. A few examples are Books and Periodicals, Business Promotion etc.

The new amendments are not applicable to Company Accommodation and Motor Car provided by the employer. But we can expect certain revised norms since the Finance Minister has hinted at prescribing new norms for these perquisites.

The following are certain perquisites where the New Budget has made an impact and taxation will be affected.

Driver's Salary: The Driver's salary was taxed at a standard rate of Rs.300/- per month irrespective of the actual salary reimbursed to the employee or salary paid to the Driver. From now onwards the taxable value will be the actual salary paid to the Driver and not the standard norm of Rs.300/-. Suppose a driver is paid Rs.2, 500/- per month then Rs.2, 500/- is taxable as a perquisite.

Salary to the sweeper or gardener: This was taxed at a rate of Rs.120/- per month. Now the same will be taxable at the actual salary paid to the sweeper or gardener and not at the rate of Rs.120/- per month.

Employees' Stock Option: This is a perquisite, which is not presently taxable. We are awaiting a clarification in this regard in the form of notification or a circular since this is bound to cause major changes. In fact, this was amended in the last budget to make it Tax-free and will be taxed only under Capital gains when the shares are sold. If there is no clarification, it may be assumed that this will also be taxed at the offer price at which these shares are issued.

Regarding other perquisites they were already taxable at the cost incurred by the company for providing the perquisite to the employee.

We can wait for a detailed treatment of all Perquisites before we arrive at the conclusion whether this will have any major impact on the Taxation for Salaried individuals as has been projected.

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