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.

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:

1. 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

2. 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.

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:

1. Director of the company

2. Employee with substantial interest (i.e., owns ≥20% of equity shares in the company)

3. 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.

Children Education Allowance (CEA) is partially exempt under Section 10(14)(ii) of the Income Tax Act, 1961, read with Rule 2BB(2)(c) of the Income Tax Rules, 1962.

Exemption Limit (as per Rule 2BB):

• ₹100 per month per child

• For a maximum of 2 children

✅ Total exemption allowed = ₹100 × 2 × 12 = ₹2,400 per annum

Important Points:

• Applicable only if CEA is specifically mentioned in the salary structure.

• If you have more than 2 children, the exemption still applies to only 2 children.

• No requirement to submit bills unless specifically asked by Assessing Officer.

Hill Area Allowance is partially exempt under Section 10(14)(ii) of the Income Tax Act, 1961, read with Rule 2BB(1)(a) of the Income Tax Rules, 1962.

Section 10(14)(ii): Allows exemption for special allowances or benefits granted to meet personal expenses due to conditions of employment such as location (hill area, remote area, etc.).

Rule 2BB(1)(a): Specifically lists “Hill Compensatory Allowance” as an exempt allowance, subject to limits depending on the location and posting.

Exemption Limits:

The exemption is based on location and altitude, and the Central Government has notified specific limits:

(As per latest CBDT Notifications – rates subject to change by government order)

Points to Remember:

• Allowance must be specifically granted for posting in the notified hill area.

• Any amount received over the exempt limit is fully taxable.

• Proof of posting in the notified area may be required in assessment.