Feb 232016

Valuation of Provision of domestic servant

Rule 3(3) prescribes the mode of the valuation. This perquisite is taxable in the hands of specified employees.

Contents of the sub –rule:

The value of the benefits to the employee (or any member of his household) resulting from the provision by the employer of services of a sweeper, a gardener, a watchmen or a personal attendant, shall be the actual cost to the employer.
The actual cost in such a case shall be the total amount of salary paid or payable by the employer or any other person on his behalf for such services as reduced by any amount paid by the employee for such services.

Thus, sub-rule (3) of rule 3 provides following aspects for valuation of perquisite–

  • The employer must have provided the services of (i) a sweeper, or (ii) a gardener, or (iii) a watchmen, or (iv) a personal attendant,
  • Provision must be provided to the employee or to any member of his household.
  • The value of the perquisite is ‘the actual cost to the employer’.

Domestic servants excluded

The rule specifically mentions only four types of domestic servants. The methods of valuing the perquisite if any other type of the domestic is provided (like a cook, dhobi, baby sitter, etc.) has been left open . Provision of such types of domestic servants may fall under the residuary clauses [rule 3(7) (ix) and shall be taxable perquisite in the case of all employees.

Meaning of ‘personal attendant’

The term ‘personal attendant‘ should not be confused with ‘personal assistant‘. The ‘personal assistant / helper’ is one who assists the employee in the performance of the duties. On the contrary, a personal attendant will have no official chores, and his duty is restricted to ‘attending’ on the employee and looking after his domestic chores ,like supervising the work of other domestic staff, attending to bank work, escorting children of employee to school, etc.

Degree of service by personal attendant is not relevant

The department have clarified that, where the attendant is provide that the residence of the employee, full cost will be taxed as perquisites in the hands of the employee irrespective of the degree of personal service rendered by the attendant to the employee.

Apparently, the clarification seeks to ensure that no claim is made to the effect that the personal attendant was deployed in the employee’s residence only on a part-time basis and that only proportionate cost of the personal service was taxable as perquisite.

Actual cost to employer

The term ‘actual cost to employer’ has specifically has been defined in the sub-rule itself as ‘the total amount of salary paid or payable by the employer or any other person on his behalf for such services.’

If any amount is paid by the employee for such services, it will be deducted.

Apart from salary paid to the servants providing such services, no other addition is required to be made qua any other payments that have been made to such servants.

Case study

An employer provides a sweeper and a personal attendant to a specified employee during the period 1-6-2015 to 31-3-2016. The sweeper was paid salary of Rs. 400 p.m. and the personal attendant was paid salary of Rs. 1200 p.m. by the employer. In addition, the employer paid them bonus of Rs. 2,000 each of the year, and also contribution Rs. 40 p.m. and Rs. 120 p.m. respectively to the provident fund accounts of the sweeper and personal attendant.

In this case, salary and bonus only will have to be taken as ‘salary’, and employer’s contribution to the provident fund is not to be included.

Salary for one year

– Sweeper                                                         -Rs. 4,800
– Personal attendant                                       – Rs. 14,400
– Bonus -2000*2                                             – Rs. 4000

Cost to employer for one year                       – Rs. 23,200

Since the amenity was provided only for 10 months during the previous year, the value of the perquisite will be-
Rs 23,200 * 10/12 = Rs. 19,334