How Perquisites (Perks) works
Perquisites are valued using rules in the Income-tax Act and added to your taxable salary. Some, like company accommodation or a car for personal use, have specific valuation methods, while others may be tax-free up to limits.
Why Perquisites (Perks) matters
Perquisites can raise your tax even though no extra cash reaches you, so it helps to know which perks are taxable and how they are valued before accepting them.
Common perquisites and their tax
The most common perquisites are rent-free or subsidised accommodation, a company car used for personal travel, interest-free or low-interest loans, and employer-paid club or utility bills. Each has its own valuation rule: accommodation is valued as a percentage of salary or the actual rent, and a car is valued by a fixed monthly amount based on engine capacity and who pays for fuel. Some benefits, such as modest meal allowances or medical facilities, are exempt up to limits. Because the taxable value is added to your salary and taxed at your slab, a rich perk can raise your tax bill even though no extra cash reaches your account, so it is worth valuing perks before you accept an offer built around them.
Frequently asked questions
Are all perquisites taxable?
Most are, at a value set by the tax rules, but some perks are exempt up to limits, such as certain meal or medical benefits.
Is a company car a perquisite?
Yes. A car provided for personal use is a taxable perquisite, valued using a fixed method based on engine capacity and who bears the running cost.