Valuation of perquisites.
Income Tax •
Income tax Rules Rule
3. For the purpose of computing the income
chargeable under the head “Salaries”, the value of perquisites provided by the
employer directly or indirectly to the assessee (hereinafter referred to as
employee) or to any member of his household by reason of his employment shall
be determined in accordance with the following sub-rules, namely:—
(1) The value of
residential accommodation provided by the employer during the previous year
shall be determined on the basis provided in the Table below (See page 1.39) :
TABLE
I
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Sl. No.
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Circumstances
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Where accommodation is unfurnished
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Where accommodation is furnished
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(1)
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(2)
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(3)
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(4)
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(1)
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Where the accommodation is provided by the
Central Government or any State Government to the employees either holding
office or post in connection with the affairs of the Union or of such State.
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License fee determined by the Central
Government or any State Government in respect of accommodation in accordance
with the rules framed by such Government as reduced by the rent actually paid
by the employee.
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The value of perquisite as determined under
column (3) and increased by 10% per annum of the cost of furniture (including
television sets, radio sets, refrigerators, other household appliances,
air-conditioning plant or equipment) or if such furniture is hired from a
third party, the actual hire charges payable for the same as reduced by any
charges paid or payable for the same by the employee during the previous
year.
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(2)
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Where the
accommodation is provided by any other employer and—
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(a) where the accommodation is owned
by the employer, or
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(i) 15% of salary in cities having
population exceeding 25 lakhs as per 2001 census;
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The value of perquisite as determined under
column (3) and increased by 10% per annum of the cost of furniture (including
television sets, radio sets, refrigerators, other household appliances,
air-conditioning plant or equipment or other similar appliances or gadgets)
or if such furniture is hired from a third party, by the actual hire charges
payable for the same as reduced by any charges paid or payable for the same
by the employee during the previous year.
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(ii) 10% of salary in cities having
population exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 census;
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(iii) 7.5% of salary in other areas,
in respect of the period during which the said accommodation was occupied by
the employee during the previous year as reduced by the rent, if any,
actually paid by the employee.
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(b) where the accommodation is taken
on lease or rent by the employer.
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Actual amount of lease rental paid or
payable by the employer or 15% of salary whichever is lower as reduced by the
rent, if any, actually paid by the employee.
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The value of perquisite as determined under
column (3) and increased by 10% per annum of the cost of furniture (including
television sets, radio sets, refrigerators, other household appliances,
air-conditioning plant or equipment or other similar appliances or gadgets)
or if such furniture is hired from a third party, by the actual hire charges
payable for the same as reduced by any charges paid or payable for the same
by the employee during the previous year.
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(3)
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Where the accommodation is provided by
the employer specified in serial number (1) or (2) in a hotel (except where
the employee is provided such accommodation for a period not exceeding in
aggregate fifteen days on his transfer from one place to another).
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Not applicable
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24% of salary paid or payable for the
previous year or the actual charges paid or payable to such hotel, which is
lower, for the period during which such accommodation is provided as reduced
by the rent, if any, actually paid or payable by the employee:
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Provided that nothing contained in this sub-rule shall
apply to any accommodation provided to an employee working at a mining site or
an on-shore oil exploration site or a project execution site, or a dam site or
a power generation site or an off-shore site—
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(i)
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which, being of a temporary nature and
having plinth area not exceeding 800 square feet, is located not less than
eight kilometres away from the local limits of any municipality or a
cantonment board; or
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(ii)
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which is located in a remote area:
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Provided further that where on account of his transfer from one
place to another, the employee is provided with accommodation at the new place
of posting while retaining the accommodation at the other place, the value of
perquisite shall be determined with reference to only one such accommodation
which has the lower value with reference to the Table above for a period not
exceeding 90 days and thereafter the value of perquisite shall be charged for
both such accommodations in accordance with the Table.
Explanation.—For the purposes of
this sub-rule, where the accommodation is provided by the Central Government or
any State Government to an employee who is serving on deputation with any body
or undertaking under the control of such Government,—
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(i)
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the employer of such an employee shall be
deemed to be that body or undertaking where the employee is serving on
deputation; and
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(ii)
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the value of perquisite of such an
accommodation shall be the amount calculated in accordance with Sl. No. (2)(a) of Table I, as if the
accommodation is owned by the employer.
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(2)(A) The value of perquisite by way of
use of motor car to an employee by an employer shall be determined in
accordance with the following Table, namely:—
TABLE
II
VALUE OF PERQUISITE PER CALENDAR MONTH
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Sl. No.
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Circumstances
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Where cubic capacity of engine does not exceed 1.6 litres
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Where cubic capacity of engine exceeds 1.6 litres
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(1)
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(2)
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(3)
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(4)
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(1)
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Where the motor car is owned or hired by the
employer and—
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(a) is used wholly and exclusively
in the performance of his official duties;
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No value:
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No value:
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Provided that the documents specified in clause (B) of this sub-rule are maintained
by the employer.
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Provided that the documents specified in clause (B) of this sub-rule are maintained
by the employer.
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(b) is used exclusively for the
private or personal purposes of the employee or any member of his household
and the running and maintenance expenses are met or reimbursed by the
employer;
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Actual amount of expenditure incurred by the
employer on the running and maintenance of motor car during the relevant
previous year including remuneration, if any, paid by the employer to the
chauffeur as increased by the amount representing normal wear and tear of the
motor car and as reduced by any amount charged from the employee for such
use.
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Actual amount of expenditure incurred by the
employer on the running and maintenance of motor car during the relevant
previous year including remuneration, if any, paid by the employer to the
chauffeur as increased by the amount representing normal wear and tear of the
motor car and as reduced by any amount charged from the employee for such
use.
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(c) is used partly in the
performance of duties and partly for private or personal purposes of his own
or any member of his household and—
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(i) the expenses on maintenance and
running are met or reimbursed by the employer;
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Rs. 1,800 (plus Rs. 900, if chauffeur is also provided to run the
motor car)
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Rs. 2,400 (plus Rs. 900, if chauffeur is also provided to run the
motor car)
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(ii) the expenses on running and
maintenance for private or personal use are fully met by the assessee.
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Rs. 600 (plus Rs. 900, if chauffeur is also provided by the
employer to run the motor car)
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Rs. 900 (plus Rs. 900, if chauffeur is also provided to run the
motor car)
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(2) Where the employee owns a motor car but
the actual running and maintenance charges (including remuneration of the
chauffeur, if any) are met or reimbursed to him by the employer and
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(i) such reimbursement is for
the use of the vehicle wholly and exclusively for official purposes;
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No value:
Provided that the documents specified in clause
(B) of this sub-rule are
maintained by the employer.
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No value:
Provided that the documents specified in clause
(B) of this sub-rule are
maintained by the employer.
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(ii) such reimbursement is for
the use of the vehicle partly for official purposes and partly for personal
or private purposes of the employee or any member of his household.
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Subject to the provisions of clause (B) of this sub-rule, the actual
amount of expenditure incurred by the employer as reduced by the amount
specified in Sl. No. (1)(c)(i) above.
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Subject to the provisions of clause (B) of this sub-rule, the actual
amount of expenditure incurred by the employer as reduced by the amount
specified in Sl. No. (1)(c)(i) above.
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(3)
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Where the employee owns any other
automotive conveyance but the actual running and maintenance charges are met
or reimbursed to him by the employer and—
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(i) such reimbursement is for
the use of the vehicle wholly and exclusively for official purposes;
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No value:
Provided that the documents specified in clause
(B) of this sub-rule are
maintained by the employer.
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Not applicable
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(ii) such reimbursement is for
the use of vehicle partly for official purposes and partly for personal or
private purposes of the employee.
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Subject to the
provisions of clause (B) of
this sub-rule, the actual amount of expenditure incurred by the employer as
reduced by the amount of Rs. 900.
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Provided that where one or more motor-cars are owned or
hired by the employer and the employee or any member of his household are
allowed the use of such motor-car or all of any of such motor-cars (otherwise
than wholly and exclusively in the performance of his duties), the value of
perquisite shall be the amount calculated in respect of one car in accordance
with Sl. No. (1)(c)(i) of Table II as if the employee had
been provided one motor-car for use partly in the performance of his duties and
partly for his private or personal purposes and the amount calculated in
respect of the other car or cars in accordance with Sl. No. (1)(b) of Table II as if he had been
provided with such car exclusively for his private or personal purposes.
(B) Where the employer or the employee
claims that the motor-car is used wholly and exclusively in the performance of
official duty or that the actual expenses on the running and maintenance of the
motor-car owned by the employee for official purposes is more than the amounts
deductible in Sl. No. 2(ii) or
3(ii) of Table II, he may claim
a higher amount attributable to such official use and the value of perquisite
in such a case shall be the actual amount of charges met or reimbursed by the
employer as reduced by such higher amount attributable to official use of the
vehicle provided that the following conditions are fulfilled :—
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(a)
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the employer has maintained complete details
of journey undertaken for official purpose which may include date of journey,
destination, mileage, and the amount of expenditure incurred thereon;
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(b)
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the employer gives a certificate to the
effect that the expenditure was incurred wholly and exclusively for the
performance of official duties.
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Explanation.—For the purposes of
this sub-rule, the normal wear and tear of a motor-car shall be taken at 10 per
cent per annum of the actual cost of the motor-car or cars.
(3) The value of
benefit to the employee or any member of his household resulting from the provision
by the employer of services of a sweeper, a gardener, a watchman 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.
(4) The value of the
benefit to the employee resulting from the supply of gas, electric energy or
water for his household consumption shall be determined as the sum equal to the
amount paid on that account by the employer to the agency supplying the gas,
electric energy or water. Where such supply is made from resources owned by the
employer, without purchasing them from any other outside agency, the value of perquisite
would be the manufacturing cost per unit incurred by the employer. Where the
employee is paying any amount in respect of such services, the amount so paid
shall be deducted from the value so arrived at.
(5) The value of
benefit to the employee resulting from the provision of free or concessional
educational facilities for any member of his household shall be determined as
the sum equal to the amount of expenditure incurred by the employer in that
behalf or where the educational institution is itself maintained and owned by
the employer or where free educational facilities for such member of employees’
household are allowed in any other educational institution by reason of his
being in employment of that employer, the value of the perquisite to the employee
shall be determined with reference to the cost of such education in a similar
institution in or near the locality. Where any amount is paid or recovered from
the employee on that account, the value of benefit shall be reduced by the
amount so paid or recovered :
Provided that where the educational institution itself
is maintained and owned by the employer and free educational facilities are
provided to the children of the employee or where such free educational
facilities are provided in any institution by reason of his being in employment
of that employer, nothing contained in this sub-rule shall apply if the cost of
such education or the value of such benefit per child does not exceed one
thousand rupees per month.
(6) The value of any
benefit or amenity resulting from the provision by an employer who is engaged
in the carriage of passengers or goods, to any employee or to any member of his
household for personal or private journey free of cost or at concessional fare,
in any conveyance owned, leased or made available by any other arrangement by
such employer for the purpose of transport of passengers or goods shall be
taken to be the value at which such benefit or amenity is offered by such
employer to the public as reduced by the amount, if any, paid by or recovered
from the employee for such benefit or amenity :
Provided that nothing contained in this sub-rule shall
apply to the employees of an airline or the railways.
(7) In terms of
provisions contained in sub-clause (viii)
of clause (2) of section 17,
the following other benefits or amenities and value thereof shall be determined
in the manner provided hereunder:
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(i)
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The value of the benefit to the assessee
resulting from the provision of interest-free or concessional loan for any
purpose made available to the employee or any member of his household during
the relevant previous year by the employer or any person on his behalf shall
be determined as the sum equal to the interest computed at the rate charged
per annum by the State Bank of India, constituted under the State Bank of
India Act, 1955 (23 of 1955), as on the 1st day of the relevant previous year
in respect of loans for the same purpose advanced by it on the maximum
outstanding monthly balance as reduced by the interest, if any, actually paid
by him or any such member of his household:
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Provided that no value would be charged if such loans
are made available for medical treatment in respect of diseases specified in
rule 3A of these Rules or where the amount of loans are petty not exceeding
in the aggregate twenty thousand rupees:
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Provided further that where the benefit relates to the loans
made available for medical treatment referred to above, the exemption so
provided shall not apply to so much of the loan as has been reimbursed to the
employee under any medical insurance scheme.
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(ii)
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The value of travelling, 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 concession or assistance referred to in rule 2B of these
rules, shall be determined as the sum equal to the amount of the expenditure
incurred by such employer in that behalf. Where such facility is maintained
by the employer, and is not available uniformly to all employees, the value
of 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 of his household
accompanying him, the amount of expenditure so incurred shall also be a
fringe benefit or amenity:
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Provided that where any official tour is extended as
a vacation, the value of such fringe benefit shall be limited to the expenses
incurred in relation to such extended period of stay or vacation. The amount
so determined shall be reduced by the amount, if any, paid or recovered from
the employee for such benefit or amenity.
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(iii)
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The value of free food and non-alcoholic
beverages provided by the employer to an employee shall be the amount of
expenditure incurred by such employer. The amount so determined shall be
reduced by the amount, if any, paid or recovered from the employee for such
benefit or amenity:
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Provided that nothing contained in this clause shall
apply to free food and non-alcoholic beverages provided by such employer
during working hours at office or business premises or through paid vouchers
which are not transferable and usable only at eating joints, to the extent
the value thereof in either case does not exceed fifty rupees per meal or to
tea or snacks provided during working hours or to free food and non-alcoholic
beverages during working hours provided in a remote area or an off-shore
installation.
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1[Provided further that the
exemption provided in the first proviso in respect of free food and
non-alcoholic beverage provided by such employer through paid voucher shall
not apply to an employee, being an assessee, who has exercised option under
sub-section (5) of section 115BAC.]
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(iv)
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The value of any gift, or voucher, or token
in lieu of which such gift may be received by the employee or by member of
his household on ceremonial occasions or otherwise from the employer shall be
determined as the sum equal to the amount of such gift:
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Provided that where the value of such gift, voucher
or token, as the case may be, is below five thousand rupees in the aggregate
during the previous year, the value of perquisite shall be taken as “nil”.
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(v)
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The amount of expenses including membership
fees and annual fees incurred by the employee or any member of his household,
which is charged to a credit card (including any add-on-card) provided by the
employer, or otherwise, paid for or reimbursed by such employer shall be
taken to be the value of perquisite chargeable to tax as reduced by the
amount, if any paid or recovered from the employee for such benefit or
amenity:
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Provided that there shall be no value of such benefit
where expenses are incurred wholly and exclusively for official purposes and
the following conditions are fulfilled:—
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(a)
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complete details in respect of such
expenditure are maintained by the employer which may, inter alia, include the date
of expenditure and the nature of expenditure;
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(b)
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the employer gives a certificate for such
expenditure to the effect that the same was incurred wholly and exclusively
for the performance of official duties.
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(vi)
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(A)
The value of benefit to the employee resulting from the payment or
reimbursement by the employer of any expenditure incurred (including the
amount of annual or periodical fee) in a club by him or by a member of his
household shall be determined to be the actual amount of expenditure incurred
or reimbursed by such employer on that account. The amount so determined
shall be reduced by the amount, if any paid or recovered from the employee
for such benefit or amenity:
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Provided that where the employer has obtained
corporate membership of the club and the facility is enjoyed by the employee
or any member of his household, the value of perquisite shall not include the
initial fee paid for acquiring such corporate membership.
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(B)
Nothing contained in this clause shall apply if such expenditure is incurred
wholly and exclusively for business purposes and the following conditions are
fulfilled:—
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(a)
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complete details in respect of such
expenditure are maintained by the employer which may, inter alia, include the date of
expenditure, the nature of expenditure and its business expediency;
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(b)
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the employer gives a certificate for such
expenditure to the effect that the same was incurred wholly and exclusively
for the performance of official duties.
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(C)
Nothing contained in this clause shall apply for use of health club, sports
and similar facilities provided uniformly to all employees by the employer.
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(vii)
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The value of benefit to the employee
resulting from the use by the employee or any member of his household of any
movable asset (other than assets already specified in this rule and other
than laptops and computers) belonging to the employer or hired by him shall
be determined at 10 per cent per annum of the actual cost of such asset or
the amount of rent or charge paid or payable by the employer, as the case may
be, as reduced by the amount, if any, paid or recovered from the employee for
such use.
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(viii)
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The value of benefit to the employee arising
from the transfer of any movable asset belonging to the employer directly or
indirectly to the employee or any member of his household shall be determined
to be the amount representing the actual cost of such assets to the employer
as reduced by the cost of normal wear and tear calculated at the rate of 10
per cent of such cost for each completed year during which such asset was put
to use by the employer and as further reduced by the amount, if any, paid or
recovered from the employee being the consideration for such transfer :
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Provided that in the case of computers and electronic
items, the normal wear and tear would be calculated at the rate of 50 per
cent and in the case of motor cars at the rate of 20 per cent by the reducing
balance method.
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(ix)
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The value of any other benefit or amenity,
service, right or privilege provided by the employer shall be determined on
the basis of cost to the employer under an arm’s length transaction as
reduced by the employee’s contribution, if any :
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Provided that nothing contained in this clause shall apply to the
expenses on telephones including a mobile phone actually incurred on behalf
of the employee by the employer.
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(8)(i) For the purposes of sub-clause (vi) of clause (2) of section 17, the fair market
value of any specified security or sweat equity share, being an equity share in
a company, on the date on which the option is exercised by the employee, shall
be determined in accordance with the provisions of clause (ii) or clause (iii).
(ii) In a case where, on the date of
the exercising of the option, the share in the company is listed on a
recognized stock exchange, the fair market value shall be the average of the
opening price and closing price of the share on that date on the said stock
exchange :
Provided that where, on the date of exercising of the
option, the share is listed on more than one recognized stock exchanges, the
fair market value shall be the average of opening price and closing price of
the share on the recognised stock exchange which records the highest volume of
trading in the share :
Provided further that where, on the date of exercising of the
option, there is no trading in the share on any recognized stock exchange, the
fair market value shall be—
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(a)
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the closing price of the share on any
recognised stock exchange on a date closest to the date of exercising of the
option and immediately preceding such date; or
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(b)
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the closing price of the share on a
recognised stock exchange, which records the highest volume of trading in
such share, if the closing price, as on the date closest to the date of
exercising of the option and immediately preceding such date, is recorded on
more than one recognized stock exchange.
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(iii) In a case where, on the date of
exercising of the option, the share in the company is not listed on a
recognised stock exchange, the fair market value shall be such value of the
share in the company as determined by a merchant banker on the specified date.
(iv) For the purpose of this
sub-rule,—
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(a)
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“closing price” of a share on a recognised
stock exchange on a date shall be the price of the last settlement on such
date on such stock exchange :
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Provided that where the stock exchange quotes both
“buy” and “sell” prices, the closing price shall be the “sell” price of the
last settlement;
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(b)
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“merchant banker” means category I merchant
banker registered with Securities and Exchange Board of India established
under section 3 of the Securities and Exchange Board of India Act, 1992 (15
of 1992);
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(c)
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“opening price” of a share on a recognised
stock exchange on a date shall be the price of the first settlement on such
date on such stock exchange :
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Provided that where the stock exchange quotes both
“buy” and “sell” prices, the opening price shall be the “sell” price of the
first settlement;
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(d)
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“recognised stock exchange” shall have the
same meaning assigned to it in clause (f)
of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
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(e)
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“specified date” means,—
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(i)
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the date of exercising of the option; or
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(ii)
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any date earlier than the date of the
exercising of the option, not being a date which is more than 180 days
earlier than the date of the exercising.
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(9) For the purposes
of sub-clause (vi) of clause (2) of section 17, the fair market
value of any specified security, not being an equity share in a company, on the
date on which the option is exercised by the employee, shall be such value as
determined by a merchant banker on the specified date.
Explanation.—For the purposes of
this sub-rule, “merchant banker” and “specified date” shall have the meanings
assigned to them in sub-clause (b)
and sub-clause (e) respectively
of clause (iv) of sub-rule (8).
(10) This rule shall
come into force with effect from the 1st day of April, 2009.
Explanation.—For the purposes of
this rule—
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(i)
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“accommodation” includes a house, flat, farm
house or part thereof, or accommodation in a hotel, motel, service apartment,
guest house, caravan, mobile home, ship or other floating structure;
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(ii)
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“entertainment” includes hospitality of any
kind and also, expenditure on business gifts other than free samples of the
employers own product with the aim of advertising to the general public;
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(iii)
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“hotel” includes licensed accommodation in
the nature of motel, service apartment or guest house;
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(iv)
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“member of household” shall include—
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(a)
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spouse(s),
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(b)
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children and their spouses,
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(c)
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parents, and
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(d)
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servants and dependants;
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(v)
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“remote area”, for purposes of proviso to
this sub-rule means an area that is located at least 40 kilometres away from
a town having a population not exceeding 20,000 based on latest published
all-India census;
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(vi)
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“salary” includes the pay, allowances, bonus
or commission payable monthly or otherwise or any monetary payment, by
whatever name called from one or more employers, as the case may be, but does
not include the following, namely:—
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(a)
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dearness allowance or dearness pay unless it
enters into the computation of superannuation or retirement benefits of the
employee concerned;
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(b)
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employer’s contribution to the provident
fund account of the employee;
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(c)
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allowances which are exempted from payment
of tax;
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(d)
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the value of perquisites specified in clause
(2) of section 17 of the
Income-tax Act;
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(e)
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any payment or expenditure specifically
excluded under proviso to sub-clause (iii)
of clause (2) or proviso to
clause (2) of section 17;
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(f)
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lump-sum payments received at the time of
termination of service or superannuation or voluntary retirement, like
gratuity, severance pay, leave encashment, voluntary retrenchment benefits,
commutation of pension and similar payments;
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(vii)
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“maximum outstanding monthly balance” means
the aggregate outstanding balance for each loan as on the last day of each
month.]
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