Tax on Non-monetary Perquisites paid by employer [Section 10(10CC)]

Section 10(10CC) of the Income Tax Act, 1961 deals with the taxation of non-monetary perquisites provided by an employer to an employee. Non-monetary perquisites refer to benefits or facilities provided by the employer other than monetary compensation.

Under this section, any non-monetary perquisite provided by the employer is considered as taxable income for the employee. However, there are certain provisions and exemptions that apply.

Firstly, the value of non-monetary perquisites is determined based on the fair market value of such perquisites. The fair market value is the price that such perquisites would fetch in the open market.

Secondly, certain perquisites are exempt from tax if they are provided in the course of employment, such as medical facilities, traveling expenses, and accommodation facilities.

Thirdly, the tax on non-monetary perquisites is to be paid by the employer on behalf of the employee. The employer deducts the tax from the employee’s salary and pays it to the government.

Lastly, the employee is required to disclose the value of non-monetary perquisites received in the income tax return. The employer also provides Form 16 to the employee, which contains details of the perquisites provided and the tax deducted.

Examples of Non-monetary Perquisites:

Non-monetary perquisites are any benefits or facilities provided to an employee by the employer, other than cash. Some examples of non-monetary perquisites include:

• Accommodation provided by the employer
• Car provided by the employer
• Medical facilities provided by the employer
• Leave travel allowance (LTA)
• Meal coupons
• Gift vouchers
• Educational benefits
• The employer pays the club membership fees of the employee.
• The employer leases a car to the employee and pays the lease expenses.
• The employer pays the house rent allowance to the employee.
• The employer pays the medical expenses of the employee.
• The employer pays the educational expenses of the employee’s children.
• The employer provides leave travel allowance to the employee.
• The employer gives gifts or vouchers to the employee.

Examples of non-monetary perquisites that are not covered by Section 10(10CC)

• The employer provides a salary to the employee.
• The employer provides a bonus to the employee.
• The employer provides a commission to the employee.
• The employer provides a reimbursement for travel expenses to the employee.
• The employer provides a reimbursement for food expenses to the employee.

Conditions for exemption under Section 10(10CC)

• The following conditions must be met for the exemption under Section 10(10CC) to be available:
• The employer must pay the tax on behalf of the employee on a non-monetary perquisite.
• The non-monetary perquisite must be provided to the employee in the course of his employment.
• The non-monetary perquisite must not be specifically exempted from tax under any other provision of the Income Tax Act.

Example:

1. An employer provides accommodation to its employees. The fair market value of the accommodation is Rs. 10,000 per month. The employer pays the income tax on the value of the accommodation. The employee will not be taxed on the value of the accommodation as the employer has paid the tax.
2. An employer provides a company car to its employee. The fair market value of the car is Rs. 10,00,000. The employer pays the income tax on the fair market value of the car on behalf of the employee.

The employee will not be taxable on the value of the car. However, the employer will not be allowed to deduct the income tax paid on the car in computing its taxable income.