Valuation of Holiday facilities provided by employer
This perquisites is taxable in the hands of all employees
Contents of rule 3(7)(ii): The values is as follows
- The value of traveling, touring, accommodation and any other expenses paid for (or borne or reimbursed) by the employer for any holiday availed of by the employee (or any member of his household) (other than leave travel concession or assistance referred to in rule 2B) shall be determined as the sum equal to the amount of expenditure incurred by the employer in that behalf.
- Where such facility is maintained by the employer, and is not available uniformity to all employees, the value of the benefit shall be taken to be the value at which such facilities are offered by other agencies to the public.
- Where the employee is on official tour and the expenses are incurred in respect of any member for his household accompanying him, the amount of expenditure so incurred shall be a fringe benefit or amenity.
- Where any official tour is extended as a vacation, the value of such fringe benefit will be limited to the expenses incurred in relation to such extended period of stay or vacation.
- The amount determined as per the above rules shall be reduced by the amount, if any paid or recovered from the employee for such benefit or amenity.
The sub-rule stipulates that where any holiday is availed of by the employees or any member of his household, other than leave travel concession (covered under separate rule naming rule 2B), and the expenses are met by the employer, either directly or by the way of reimbursement, there will be a taxable perquisite.
For the purpose of determining the value of the perquisite, the following aspects need to be considered:
| Types of expenses covered | The expenses covered under the rule are-
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| Types of tour covered | The rule speak about two types of tours, viz.,(1) Officials tours, and
(2) Officials tours extended as a vacation. The following practical situation may arise from the above tours: OFFICIAL TOURS – The expenses incurred on the employee will not be treated as a perquisite. However, if the employee is accompanied by the members of his family (i.e. his / her spouse), expenses incurred on the members of the family (on travel, local tours and boarding lodging) will be treated as a perquisite. PRIVATE/HOLIDAY TOURS – In case of purely private/holiday tours all expenses paid for or borne or reimbursed by the employer for any holiday availed of by employee or any member of his household, shall be determined as the sum equal to the amount of expenditure incurred by the employer in that behalf. |
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| When official tour is combined with vacation | Expenses on the employee during the vacation period (boarding and lodging and local tours) and all expense for the entire period including official tour period on the members of his household who accompanied him (on travel, local tours and boarding and lodging) will be treated as perquisites.In respect of employee, the rule provides on travel expenses on the employees both ways will not treated as a perquisite. | ||||||
| When a family member (e.g. spouse of employee) accompanies the employee on an official tour | The rule specifies that where any holiday facility is provided to any member of the household accompanying the employee on the official tour, it shall be deemed to be a perquisite. All expenses on the accompanying member, if borne by the employer directly or indirectly, will be taxed as a perquisite. |
Case Study
- A company executive goes on an official tour for five days and returns to headquarters. He is accompanied by the three members of his household. The company meets the expenses comprising (1) train fare at Rs.600 per head both ways, and (2) other expenses at Rs. 650 per head day for 5 days.
In this case, the value of the perquisite will be the expenses incurred on the members of the family only, as follows:
Train fare – 600*3 – Rs.1800
Other expenses -650*3*5 Rs.9750
Value of the perquisite Rs.11,550
- A company executive goes on an official tour for 4 days, and extends it as a vacation for 4 more days before returning to headquarters. He is accompanied by two members of his household. The company meets the expenses comprising (1) Airfare at Rs.2,500 per head to and fro and (2) other expenses at Rs.800 per day per head.
In this case, the value of the perquisite will be the sum total of (1) other expenses of the executive for the vacation period of 4 days, and (2) air fare and other expenses of the members of the family for 8 days.
Airfare on members of the household -Rs. 2,500*2 – Rs.5,000
Other expenses on executive -800*4 – Rs.3,200
Other expenses on members of the household
800*2*8 – Rs.12,800
Value of perquisite – Rs.21,000