Valuation of perquisite in the assessment of the employees for enjoyment of moveable assets of employer
We all know that perquisites are the casual emolument or benefit attached to an office or position in addition to salary or wages. Generally employers equip their employees with assets which help them in efficient working – like laptop, computer, car, other electronic items etc. Income tax act assumes these enjoyments as income of employees and taxed under the head – “Income under the head salary”. Here an attempt is made to understand the extent of taxation involved when employee uses these assets.
Perquisite in respect of use of movable assets-
| Mode of valuation | Perquisite in respect of use of movable assets | ||
| Computer/laptop | Any other assets | ||
| Owned by the employer | Taken on hire by employer | ||
| Step 1- Find out cost to the employer
Step 2- Less Amount recovered from the employee
Taxable value of the perquisite (Step 1- Step 2) |
Nil
Nil
Nil |
10% per annum of actual cost
Recovery from the employee
Balancing amount (if it is positive) |
Amount of rent paid or payable
Recovery from the employee
Balancing amount (if it is positive). |
In the above cases purpose for which assets are provided by employer is irrelevant.
Case study
Find out the taxable value of the perquisite in the following cases for the assessment year 2016-17 –
Case 1: Mr. X is given a laptop by the employer-company for using it for office and private purposes (ownership is not transferred). Cost of the laptop to the employer is Rs.96,000/-.
Solution:
Generally laptops are issued to employee for use it for their official duties when they are out of office or at remote areas. Hence these are not treated as any additional benefits accruing to employee.
Further, as discussed in above rules, since Mr. X is provided with a laptop by the employer,henceit is not chargeable to tax.
Case 2: On June 15,2015, the company gives its music system to Mr. Y for domestic use. Ownership is not transferred. Cost of music system (in 2001) to the employer is Rs.15,000/-
Solution:
Mr. Y is provided a music system by the employer. The taxable value of the perquisites is determined @10% per annum of cost. Accordingly Rs.1192/-(being Rs.15,000*10/100*290 days/365 days in a year) is chargeable to tax each year commencing from AY 2016-17 till the assets kept in his possession. Further if any amount is recovered by employer from employee, same will be deducted in arriving at taxable value.