INTERVIEW QUESTIONS TAX PERQUISITE TAX DETAILS

Question: What are some examples of the most common Perquisites and their Taxation?

Answer: Some of the most popular perquisites provided by a major percentage of companies to their employees are accommodation, cars and stock options. Let us see how these perks are taxed and how is this tax calculated:-

Company provided Accommodation:

A lot of employees are provided leased accommodation option by their employers. This cost of accommodation is taxable and is a perk offered by the company. The tax will however depend upon whether the place is rented, owned or leased by the employer.

The tax levied in the above listed cases is as depicted in the table below.

Type of Accommodation


Population of the city


Percentage of tax

Owned by employer


Greater than 25 lakhs


15%


Between 10-25 lakhs


10%


Below 10 lakhs


7%

Leased by the employer


Actual rental paid or 15% whichever is lower


NA


Accommodation provided in a hotel or guest house for more than 15 days


24%

Cars provided by Employer:

The tax on this type of perquisite depends upon two factors. First is whether the car is owned or leased by the employer and second whether the car is being used only for official purposes or partly for personal purposes and partly for official use. In both the cases, the tax calculated will be different. The table below depicts the corresponding rate of taxation in the various cases that may arise.

Type of Car


Rate of tax

Small cars below 1.6 litres


Rs.1800 per month

Big cars above 1.6 litres


Rs.2400 per month

Stock options made available to Employees by Employer:-

Stocks or shares are the most common way of rewarding employees. Most companies offer stock options to employees. The fair market value less the amount recovered from employee is the amount of tax that is applicable on shares as perquisites. The difference between FMV and selling price of the share is the net capital gain in the hands of the employees and that is the amount that is taxable.

Perquisites are taxed as per their nature and the provision of the same by the employer. However, with the economy growing rapidly and globalization seeping in, most employers have gone global and are adapting to international ways of taking care of employees. Perquisites paid as part of perks is an important component for employees and has been segregated as a separate taxable component by the government of India.

Some of the most popular perquisites provided by a major percentage of companies to their employees are accommodation, cars and stock options. Let us see how these perks are taxed and how is this tax calculated:-

Company provided Accommodation:

A lot of employees are provided leased accommodation option by their employers. This cost of accommodation is taxable and is a perk offered by the company. The tax will however depend upon whether the place is rented, owned or leased by the employer.

The tax levied in the above listed cases is as depicted in the table below.

Type of Accommodation


Population of the city


Percentage of tax

Owned by employer


Greater than 25 lakhs


15%


Between 10-25 lakhs


10%


Below 10 lakhs


7%

Leased by the employer


Actual rental paid or 15% whichever is lower


NA


Accommodation provided in a hotel or guest house for more than 15 days


24%

Cars provided by Employer:

The tax on this type of perquisite depends upon two factors. First is whether the car is owned or leased by the employer and second whether the car is being used only for official purposes or partly for personal purposes and partly for official use. In both the cases, the tax calculated will be different. The table below depicts the corresponding rate of taxation in the various cases that may arise.

Type of Car


Rate of tax

Small cars below 1.6 litres


Rs.1800 per month

Big cars above 1.6 litres


Rs.2400 per month

Stock options made available to Employees by Employer:-

Stocks or shares are the most common way of rewarding employees. Most companies offer stock options to employees. The fair market value less the amount recovered from employee is the amount of tax that is applicable on shares as perquisites. The difference between FMV and selling price of the share is the net capital gain in the hands of the employees and that is the amount that is taxable.

Perquisites are taxed as per their nature and the provision of the same by the employer. However, with the economy growing rapidly and globalization seeping in, most employers have gone global and are adapting to international ways of taking care of employees. Perquisites paid as part of perks is an important component for employees and has been segregated as a separate taxable component by the government of India. Source: CoolInterview.com

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