Perquisites which are Taxable only in the case of Specified Employees

Salaries, Tax Ready Reckoner

Under Section 17(2) of the Income Tax Act, 1961, certain perquisites are taxable only for “specified employees”, while they remain exempt for others. Below is a detailed breakdown of these perquisites, the criteria for “specified employees,” and their valuation rules (as per FY 2024-25/AY 2025-26):

Table of Contents

1. Who is a “Specified Employee”?

An employee is classified as “specified” if they meet any of the following conditions:

Directorof the company (executive or non-executive).
Substantial interestin the company (holds >20% voting power or beneficial ownership of shares).
Gross salary(excluding non-monetary benefits) exceeds ₹50,000/month.
- Salary includes: Basic + DA + Bonus + Commission + Taxable allowances.
- Excludes: Reimbursements, non-monetary perks, and deductions like entertainment allowance.

2. Perquisites Taxable Only for Specified Employees

The following perquisites are taxable only if the employee is “specified”:

(A) Non-Monetary Perquisites

Free/Concessional Education Facilities
- Taxable value = Actual cost borne by employer – ₹1,000/month/child (max 2 children).
- Exempt: If provided in an institution owned by the employer .
Domestic Servant Facilities(e.g., gardener, sweeper, cook)
- Taxable value = Salary paid by employer – any recovery from employee .
Gas, Electricity, or Water Supply
- Taxable value = Cost paid by employer – amount recovered from employee .
Club Memberships(e.g., gym, golf club)
- Taxable value = Actual cost borne by employer .
Free/Concessional Use of Movable Assets(e.g., laptops, furniture)
- Taxable value = 10% of asset cost/year (if owned by employer) or actual hire charges .

(B) Other Fringe Benefits

Concessional Travel(e.g., free flights for family holidays) .
Credit Card Expenses(if used for personal purposes) .

3. Exceptions & Exemptions

Telephone/Internet Bills: Fully exempt if for official use .
Medical Reimbursement: Up to ₹15,000/year is exempt for all employees .
Gifts/Vouchers: Taxable only if aggregate value exceeds ₹5,000/year .

4. Valuation Examples

PERQUISITE	TAXABLE VALUE CALCULATION
Free Education	Actual cost – ₹1,000/child/month (e.g., ₹5,000 cost – ₹1,000 = ₹4,000 taxable).
Domestic Servant	₹8,000 (salary paid by employer) – ₹2,000 (recovered) = ₹6,000 taxable.
Club Membership	₹50,000 (annual fee paid by employer) = Fully taxable.