A “Specified Employee” is a category of employee for whom certain perquisites (non-monetary benefits) provided by the employer are fully taxable under Section 17(2) of the Income Tax Act, 1961, read with Rule 3 of the Income Tax Rules, 1962. As per Explanation (iv) to Section 17(2) of the Income TaxRead more
A “Specified Employee” is a category of employee for whom certain perquisites (non-monetary benefits) provided by the employer are fully taxable under Section 17(2) of the Income Tax Act, 1961, read with Rule 3 of the Income Tax Rules, 1962.
As per Explanation (iv) to Section 17(2) of the Income Tax Act, an employee is called a Specified Employee if he/she meets any one of the following conditions:
✅ Conditions:
Director of the company
Employee with substantial interest (i.e., owns ≥20% of equity shares in the company)
Employee whose salary (excluding non-monetary benefits) exceeds ₹50,000 per annum
🟡 Note: Salary here includes basic, DA (if part of retirement), bonus, commission, allowances, etc.
As per Section 17(2)(ii) read with Rule 3(1) of the Income Tax Rules, 1962, if an employer provides a rent-free house, the value of the perquisite is calculated as: Step 1: Calculate Unfurnished Accommodation Value If employer owns the house: 15% of salary (metro city) 10% of salary (cities with 10–Read more
As per Section 17(2)(ii) read with Rule 3(1) of the Income Tax Rules, 1962, if an employer provides a rent-free house, the value of the perquisite is calculated as:
Step 1: Calculate Unfurnished Accommodation Value
If employer owns the house:
15% of salary (metro city)
10% of salary (cities with 10–25 lakh population)
7.5% of salary (other towns)
If house is on lease/rent:
Lower of actual rent paid by employer or above % of salary
Here, “salary” includes:
Basic Salary + DA (if part of retirement benefits) + Bonus + Commission + All other taxable allowances
Step 2: Add Furniture Value (For Furnished Accommodation)
If the house is furnished, then the perquisite value is increased by:
10% per annum of the original cost of furniture OR Actual hire charges paid by employer, if furniture is taken on rent.
🪑 Furniture includes – TV, fridge, sofa, washing machine, air conditioner, etc.
Yes, it is taxable as a perquisite under the Income Tax Act. As per Section 17(2)(ii) of the Income Tax Act, if your employer provides you a house at a rent lower than the market value, the difference is considered a taxable benefit (perquisite). The perquisite value is calculated as per Rule 3(1likRead more
Yes, it is taxable as a perquisite under the Income Tax Act.
As per Section 17(2)(ii) of the Income Tax Act, if your employer provides you a house at a rent lower than the market value, the difference is considered a taxable benefit (perquisite).
The perquisite value is calculated as per Rule 3(1like this:
If employer owns the house:
15% of your salary (in metro cities) or 10% or 7.5% in other cities (based on population) Less Rent actually paid by you = Taxable perquisite amount
If employer has rented the house:
Lower of actual rent paid by employer OR above % of salary Less Rent paid by you = Taxable perquisite
👉 This amount is added to your salary income and taxed as per your slab.
If the cook is provided by your employer for your personal use, the entire cost incurred by the employer becomes a taxable perquisite. ✅ 100% Taxable Perquisite Includes: Salary paid to the cook Other expenses such as food, accommodation (if provided), or any reimbursement Under Section 17(2)(ii) ofRead more
If the cook is provided by your employer for your personal use, the entire cost incurred by the employer becomes a taxable perquisite.
✅ 100% Taxable Perquisite Includes:
Salary paid to the cook
Other expenses such as food, accommodation (if provided), or any reimbursement
Under Section 17(2)(ii) of the Income Tax Act, the term “perquisite” includes:
“The value of any benefit or amenity granted or provided free of cost or at concessional rate by the employer to the employee.”
Further, Rule 3(3) of the Income Tax Rules, 1962 specifically covers the valuation of personal attendants, including cooks.
Free supply of gas, electricity, or water for personal use is fully taxable as a perquisite. The amount actually paid or incurred by your employer will be added to your salary income for tax purposes. Section 17(2)(ii): “Perquisite includes the value of any benefit or amenity provided free of cost oRead more
Free supply of gas, electricity, or water for personal use is fully taxable as a perquisite. The amount actually paid or incurred by your employer will be added to your salary income for tax purposes.
Section 17(2)(ii):
“Perquisite includes the value of any benefit or amenity provided free of cost or at concessional rate by the employer…”
Tax Treatment under Rule 3(4):
If an employer provides free gas, electricity, or water for personal use (not for official use), the taxable value is calculated as follows:
🧾 When facility is owned or maintained by the employer:
The actual cost incurred by the employer is added to your salary as taxable perquisite.
🧾 When facility is provided via reimbursement or direct payment to utility provider:
The amount paid by the employer is considered your perquisite income.
My children are getting benefit of free education in my employer’s institute? Whether it is chargeable to tax? Yes, the value of free education provided by your employer to your children is considered a taxable benefit (perquisite) under the Income Tax Act. As per Section 17(2)(v) of the Income TaxRead more
My children are getting benefit of free education in my employer’s institute? Whether it is chargeable to tax?
Yes, the value of free education provided by your employer to your children is considered a taxable benefit (perquisite) under the Income Tax Act.
As per Section 17(2)(v) of the Income Tax Act, read with Rule 3(5) of the Income Tax Rules:
If your employer runs a school or has an arrangement with any educational institution to provide free or concessional education to your children, it is treated as a taxable perquisite.
However, there is an exemption: ➤ If the cost of education per child does not exceed ₹1,000 per month, then the benefit is fully tax-free.
My children are getting scholarship from my company under the Brilliant Student Program. Is this scholarship taxable? Yes, it is fully exempt from tax under Section 10(16) of the Income Tax Act. As per Section 10(16): "Any scholarship granted to meet the cost of education is exempt from income-tax."Read more
My children are getting scholarship from my company under the Brilliant Student Program. Is this scholarship taxable?
Yes, it is fully exempt from tax under Section 10(16) of the Income Tax Act.
As per Section 10(16):
“Any scholarship granted to meet the cost of education is exempt from income-tax.”
Hence, It does not matter whether the scholarship is given by a government, a trust, or a private employer, as long as the amount is meant solely for education expenses.
Different scenarios:
Condition
Taxability
Scholarship is clearly for education purposes
✅ Exempt under Section 10(16)
Scholarship is provided without any link to academic cost (like gift or reward)
❌ May be taxable as perquisite or other income
Scholarship is part of performance reward for employee’s children
❌ Likely taxable unless clearly linked to education
How is income tax calculated on LTC (Leave Travel Concession) or LTA (Leave Travel Allowance)? ✅ Relevant Legal Provisions: Section 10(5) of the Income Tax Act, 1961 Rule 2B of the Income Tax Rules, 1962 📜 Bare Act Extract – Section 10(5): “In computing the total income of a previous year of an indiRead more
How is income tax calculated on LTC (Leave Travel Concession) or LTA (Leave Travel Allowance)?
✅ Relevant Legal Provisions:
Section 10(5) of the Income Tax Act, 1961
Rule 2B of the Income Tax Rules, 1962
📜 Bare Act Extract – Section 10(5):
“In computing the total income of a previous year of an individual, the value of any travel concession or assistance received by, or due to, him— (a) from his employer for himself and his family; (b) in connection with his proceeding on leave to any place in India— shall be exempt from income tax subject to conditions prescribed.”
📜 Rule 2B – Conditions for Exemption:
The exemption is available only for travel within India.
The exemption applies to actual travel fare, not for other expenses like sightseeing, food, or hotel stays.
It can be claimed twice in a block of 4 calendar years (current block: 2022–2025).
Exemption allowed for:
Air travel (economy fare of national carrier)
Rail fare (AC first class)
Bus fare (deluxe class, if rail/air not available)
📘 Family Definition (Explanation to Section 10(5)):
Includes:
Spouse
Children (maximum of 2 children born after 1 October 1998)
Parents, brothers and sisters wholly or mainly dependent on the employee
🧮 Tax Calculation – Step-by-Step:
Scenario
Treatment
Employer reimburses actual eligible travel fare
✅ Exempt u/s 10(5) to that extent
Employer reimburses excess or non-travel expenses
❌ Taxable under “Salary”
Employee doesn’t undertake journey
❌ Entire LTA amount taxable
Journey within India for self and family
✅ Claim exemption per actual fare
🧾 Illustration:
LTA received: ₹40,000
Actual travel (AC train) fare for eligible family: ₹25,000
Exemption allowed: ₹25,000
Taxable Amount: ₹15,000
📌 Other Key Points:
Proof of travel (tickets, boarding passes, etc.) must be retained.
Unused LTC in a block? You can carry forward 1 travel to the next block, and claim it in the first year only.
If LTC is encashed without travel, it becomes fully taxable.
✅ Conclusion:
Under Section 10(5) read with Rule 2B, LTA/LTC is exempt from income tax to the extent of eligible travel fare for journeys within India. Any excess amount or non-travel expenses reimbursed are fully taxable.
Is Group Insurance Premium paid by the employer taxable in the hands of the employee? ✅ Relevant Legal Provisions: Section 17(2)(viii) of the Income Tax Act, 1961 Rule 3(1) and Rule 3(2) of the Income Tax Rules, 1962 📜 As per Section 17(2)(viii): “Perquisite” includes the value of any other benefitRead more
Is Group Insurance Premium paid by the employer taxable in the hands of the employee?
✅ Relevant Legal Provisions:
Section 17(2)(viii) of the Income Tax Act, 1961
Rule 3(1) and Rule 3(2) of the Income Tax Rules, 1962
📜 As per Section 17(2)(viii):
“Perquisite” includes the value of any other benefit or amenity provided free of cost or at concessional rate by the employer to the employee and is taxable to the extent prescribed under the rules.
🔍 Analysis: Types of Group Insurance
Type of Insurance
Who Pays?
Taxable in Employee’s Hands?
Explanation
Group Term Life Insurance
Employer
❌ Not Taxable
Treated as business expense of employer. Not a perquisite under Rule 3.
Group Health/Mediclaim Insurance
Employer
❌ Not Taxable
Not a perquisite if benefit is for employee/spouse/dependents.
Group Personal Accident Insurance
Employer
❌ Not Taxable
Treated at par with life/medical cover; not a perquisite.
Keyman Insurance Policy
Employer
✅ Taxable in employer’s hands if assigned to employee
If employer transfers policy to employee, it becomes a taxable perquisite.
🧾 Rule 3 Clarification – Perquisite Valuation:
As per Rule 3(1) and 3(2) of the Income Tax Rules, premium paid for group insurance is not treated as a taxable perquisite unless the employee is the direct beneficiary or owner of the policy.
📘 Conclusion:
✅ If your employer pays the premium of group insurance policies (term life, health, or personal accident), it is not taxable in your hands as an employee.
❌ However, if the employer assigns the policy to you, especially in case of a Keyman Insurance, the surrender value or assigned value becomes taxable under the head “Salaries”.
How is tax calculated on interest-free loans provided by my company (employer)? If your company grants you an interest-free or concessional loan, it is treated as a taxable perquisite under Salary if the total loan exceeds ₹20,000, except in cases like medical treatment for specified illnesses. TheRead more
How is tax calculated on interest-free loans provided by my company (employer)?
If your company grants you an interest-free or concessional loan, it is treated as a taxable perquisite under Salary if the total loan exceeds ₹20,000, except in cases like medical treatment for specified illnesses. The tax is computed based on SBI rates and added to your gross salary.
✅ Relevant Legal Provisions:
Section 17(2)(viii) of the Income Tax Act, 1961
Rule 3(7)(i) of the Income Tax Rules, 1962
As per Section 17(2)(viii):
“Perquisite” includes the value of any other benefit or amenity provided free of cost or at concessional rate by the employer which is prescribed, having regard to the nature and cost thereof to the employer and the financial position of the employee.
Explanation: The provision includes concessional or interest-free loans as perquisites taxable under the head Salary.
🧾 Rule 3(7)(i) – How to Compute Taxable Value of Interest-Free Loan:
The value of the perquisite is calculated as the interest calculated at the rate charged by the State Bank of India (SBI) as on the 1st day of the relevant previous year for loans of similar type, minus the interest actually recovered from the employee.
🧮 How to Calculate Taxable Perquisite:
Perquisite Value=(Loan Amount×SBI Rate×No. of months)−Interest, if any, recovered from employee
SBI Rate: As per prevailing SBI lending rate on 1st April of the financial year
Loan Value: Opening balance at the beginning of each month
Exemption: If aggregate loan amount is ≤ ₹20,000, no perquisite value is taxable
📘 Illustration:
Loan Amount: ₹5,00,000 (interest-free)
Date of loan: 1st April 2024
SBI rate on 1st April 2024: 9% p.a.
Interest recovered from employee: ₹0
Taxable Perquisite=₹5,00,000×9%=₹45,000
₹45,000 will be treated as salary income and taxed at slab rate applicable to the employee.
📌 Special Cases:
Scenario
Treatment
🏥 Loan for medical treatment (prescribed diseases under Rule 3A)
Who is specified employee?
A “Specified Employee” is a category of employee for whom certain perquisites (non-monetary benefits) provided by the employer are fully taxable under Section 17(2) of the Income Tax Act, 1961, read with Rule 3 of the Income Tax Rules, 1962. As per Explanation (iv) to Section 17(2) of the Income TaxRead more
A “Specified Employee” is a category of employee for whom certain perquisites (non-monetary benefits) provided by the employer are fully taxable under Section 17(2) of the Income Tax Act, 1961, read with Rule 3 of the Income Tax Rules, 1962.
As per Explanation (iv) to Section 17(2) of the Income Tax Act, an employee is called a Specified Employee if he/she meets any one of the following conditions:
✅ Conditions:
Director of the company
Employee with substantial interest (i.e., owns ≥20% of equity shares in the company)
Employee whose salary (excluding non-monetary benefits) exceeds ₹50,000 per annum
🟡 Note: Salary here includes basic, DA (if part of retirement), bonus, commission, allowances, etc.
See lessHow to calculate tax on rent free furnished accommodation provided by the company?
As per Section 17(2)(ii) read with Rule 3(1) of the Income Tax Rules, 1962, if an employer provides a rent-free house, the value of the perquisite is calculated as: Step 1: Calculate Unfurnished Accommodation Value If employer owns the house: 15% of salary (metro city) 10% of salary (cities with 10–Read more
As per Section 17(2)(ii) read with Rule 3(1) of the Income Tax Rules, 1962, if an employer provides a rent-free house, the value of the perquisite is calculated as:
Step 1: Calculate Unfurnished Accommodation Value
If employer owns the house:
15% of salary (metro city)
10% of salary (cities with 10–25 lakh population)
7.5% of salary (other towns)
If house is on lease/rent:
Lower of actual rent paid by employer or above % of salary
Here, “salary” includes:
Step 2: Add Furniture Value (For Furnished Accommodation)
If the house is furnished, then the perquisite value is increased by:
🪑 Furniture includes – TV, fridge, sofa, washing machine, air conditioner, etc.
See lessMy company is giving me accommodation in its housing society at concessional rent. is it taxable? How?
Yes, it is taxable as a perquisite under the Income Tax Act. As per Section 17(2)(ii) of the Income Tax Act, if your employer provides you a house at a rent lower than the market value, the difference is considered a taxable benefit (perquisite). The perquisite value is calculated as per Rule 3(1likRead more
Yes, it is taxable as a perquisite under the Income Tax Act.
As per Section 17(2)(ii) of the Income Tax Act, if your employer provides you a house at a rent lower than the market value, the difference is considered a taxable benefit (perquisite).
The perquisite value is calculated as per Rule 3(1like this:
If employer owns the house:
15% of your salary (in metro cities) or 10% or 7.5% in other cities (based on population) Less Rent actually paid by you = Taxable perquisite amount
If employer has rented the house:
Lower of actual rent paid by employer OR above % of salary Less Rent paid by you = Taxable perquisite
👉 This amount is added to your salary income and taxed as per your slab.
See lessMy employer has provided me a cook, how much amount will be taxable in my salary?
If the cook is provided by your employer for your personal use, the entire cost incurred by the employer becomes a taxable perquisite. ✅ 100% Taxable Perquisite Includes: Salary paid to the cook Other expenses such as food, accommodation (if provided), or any reimbursement Under Section 17(2)(ii) ofRead more
If the cook is provided by your employer for your personal use, the entire cost incurred by the employer becomes a taxable perquisite.
✅ 100% Taxable Perquisite Includes:
Salary paid to the cook
Other expenses such as food, accommodation (if provided), or any reimbursement
Under Section 17(2)(ii) of the Income Tax Act, the term “perquisite” includes:
Further, Rule 3(3) of the Income Tax Rules, 1962 specifically covers the valuation of personal attendants, including cooks.
See lessMy employer has provided me free gas, electricity and water facility, how much amount will be added in my salary and what will be taxability?
Free supply of gas, electricity, or water for personal use is fully taxable as a perquisite. The amount actually paid or incurred by your employer will be added to your salary income for tax purposes. Section 17(2)(ii): “Perquisite includes the value of any benefit or amenity provided free of cost oRead more
Free supply of gas, electricity, or water for personal use is fully taxable as a perquisite. The amount actually paid or incurred by your employer will be added to your salary income for tax purposes.
Section 17(2)(ii):
“Perquisite includes the value of any benefit or amenity provided free of cost or at concessional rate by the employer…”
Tax Treatment under Rule 3(4):
If an employer provides free gas, electricity, or water for personal use (not for official use), the taxable value is calculated as follows:
See lessMy children are getting benefit of free education in my employer’s institute? Whether it is chargeable to tax?
My children are getting benefit of free education in my employer’s institute? Whether it is chargeable to tax? Yes, the value of free education provided by your employer to your children is considered a taxable benefit (perquisite) under the Income Tax Act. As per Section 17(2)(v) of the Income TaxRead more
My children are getting benefit of free education in my employer’s institute? Whether it is chargeable to tax?
Yes, the value of free education provided by your employer to your children is considered a taxable benefit (perquisite) under the Income Tax Act.
As per Section 17(2)(v) of the Income Tax Act, read with Rule 3(5) of the Income Tax Rules:
-
-
See lessIf your employer runs a school or has an arrangement with any educational institution to provide free or concessional education to your children, it is treated as a taxable perquisite.
However, there is an exemption:
➤ If the cost of education per child does not exceed ₹1,000 per month, then the benefit is fully tax-free.
My children are getting scholarship from my company under brilliant student program. Whether it is chargeable to tax?
My children are getting scholarship from my company under the Brilliant Student Program. Is this scholarship taxable? Yes, it is fully exempt from tax under Section 10(16) of the Income Tax Act. As per Section 10(16): "Any scholarship granted to meet the cost of education is exempt from income-tax."Read more
My children are getting scholarship from my company under the Brilliant Student Program. Is this scholarship taxable?
Yes, it is fully exempt from tax under Section 10(16) of the Income Tax Act.
As per Section 10(16):
Hence, It does not matter whether the scholarship is given by a government, a trust, or a private employer, as long as the amount is meant solely for education expenses.
Different scenarios:
How is income tax calculated on LTC or LTA?
How is income tax calculated on LTC (Leave Travel Concession) or LTA (Leave Travel Allowance)? ✅ Relevant Legal Provisions: Section 10(5) of the Income Tax Act, 1961 Rule 2B of the Income Tax Rules, 1962 📜 Bare Act Extract – Section 10(5): “In computing the total income of a previous year of an indiRead more
How is income tax calculated on LTC (Leave Travel Concession) or LTA (Leave Travel Allowance)?
✅ Relevant Legal Provisions:
Section 10(5) of the Income Tax Act, 1961
Rule 2B of the Income Tax Rules, 1962
📜 Bare Act Extract – Section 10(5):
📜 Rule 2B – Conditions for Exemption:
The exemption is available only for travel within India.
The exemption applies to actual travel fare, not for other expenses like sightseeing, food, or hotel stays.
It can be claimed twice in a block of 4 calendar years (current block: 2022–2025).
Exemption allowed for:
Air travel (economy fare of national carrier)
Rail fare (AC first class)
Bus fare (deluxe class, if rail/air not available)
📘 Family Definition (Explanation to Section 10(5)):
Includes:
Spouse
Children (maximum of 2 children born after 1 October 1998)
Parents, brothers and sisters wholly or mainly dependent on the employee
🧮 Tax Calculation – Step-by-Step:
🧾 Illustration:
LTA received: ₹40,000
Actual travel (AC train) fare for eligible family: ₹25,000
Exemption allowed: ₹25,000
Taxable Amount: ₹15,000
📌 Other Key Points:
Proof of travel (tickets, boarding passes, etc.) must be retained.
Unused LTC in a block? You can carry forward 1 travel to the next block, and claim it in the first year only.
If LTC is encashed without travel, it becomes fully taxable.
✅ Conclusion:
Under Section 10(5) read with Rule 2B, LTA/LTC is exempt from income tax to the extent of eligible travel fare for journeys within India. Any excess amount or non-travel expenses reimbursed are fully taxable.
See lessIs group Insurance premium paid by employer is taxable in the hand of employee?
Is Group Insurance Premium paid by the employer taxable in the hands of the employee? ✅ Relevant Legal Provisions: Section 17(2)(viii) of the Income Tax Act, 1961 Rule 3(1) and Rule 3(2) of the Income Tax Rules, 1962 📜 As per Section 17(2)(viii): “Perquisite” includes the value of any other benefitRead more
Is Group Insurance Premium paid by the employer taxable in the hands of the employee?
✅ Relevant Legal Provisions:
Section 17(2)(viii) of the Income Tax Act, 1961
Rule 3(1) and Rule 3(2) of the Income Tax Rules, 1962
📜 As per Section 17(2)(viii):
🔍 Analysis: Types of Group Insurance
🧾 Rule 3 Clarification – Perquisite Valuation:
As per Rule 3(1) and 3(2) of the Income Tax Rules, premium paid for group insurance is not treated as a taxable perquisite unless the employee is the direct beneficiary or owner of the policy.
📘 Conclusion:
✅ If your employer pays the premium of group insurance policies (term life, health, or personal accident), it is not taxable in your hands as an employee.
❌ However, if the employer assigns the policy to you, especially in case of a Keyman Insurance, the surrender value or assigned value becomes taxable under the head “Salaries”.
See lessHow tax is calculated on interest free loan provided by my company?
How is tax calculated on interest-free loans provided by my company (employer)? If your company grants you an interest-free or concessional loan, it is treated as a taxable perquisite under Salary if the total loan exceeds ₹20,000, except in cases like medical treatment for specified illnesses. TheRead more
How is tax calculated on interest-free loans provided by my company (employer)?
If your company grants you an interest-free or concessional loan, it is treated as a taxable perquisite under Salary if the total loan exceeds ₹20,000, except in cases like medical treatment for specified illnesses. The tax is computed based on SBI rates and added to your gross salary.
✅ Relevant Legal Provisions:
Section 17(2)(viii) of the Income Tax Act, 1961
Rule 3(7)(i) of the Income Tax Rules, 1962
As per Section 17(2)(viii):
Explanation: The provision includes concessional or interest-free loans as perquisites taxable under the head Salary.
🧾 Rule 3(7)(i) – How to Compute Taxable Value of Interest-Free Loan:
🧮 How to Calculate Taxable Perquisite:
Perquisite Value=(Loan Amount×SBI Rate×No. of months)−Interest, if any, recovered from employee
SBI Rate: As per prevailing SBI lending rate on 1st April of the financial year
Loan Value: Opening balance at the beginning of each month
Exemption: If aggregate loan amount is ≤ ₹20,000, no perquisite value is taxable
📘 Illustration:
Loan Amount: ₹5,00,000 (interest-free)
Date of loan: 1st April 2024
SBI rate on 1st April 2024: 9% p.a.
Interest recovered from employee: ₹0
Taxable Perquisite=₹5,00,000×9%=₹45,000
₹45,000 will be treated as salary income and taxed at slab rate applicable to the employee.
📌 Special Cases: