Govt all set to axe freebies on perks

NEW DELHI/MUMBAI: Top-rung employees of multinational and domestic companies enjoying huge perks along with their salaries, better watch out. The government could well tighten norms in the valuation of a host of perks to prevent possible misuse. Tightening of norms is being considered nearly three-and-a-half years after they were liberalised by the Central Board of Direct Taxes. The perks include accommodation, cars, interest on loans, educational facilities, use of laptops and computers and entertainment expenses. Perks are benefits over and above the normal salary received by an employee and these are taxable under the income tax law . Perquisites also cover employees stock option plans, personal attendants, gas, electricity and water, concessional education, concessional journeys, interest-free loans, gift vouchers, free meals, among others. Some changes were made in perquisite valuation of concessional loans to employees and lunch coupons in December last year. However, the tax authorities are understood to be taking a re-look at the valuation of the entire gamut of perks. The major ones, of course, are likely to be cars, credit cards and club expenses. Exemptions are up for review along with a tightening of the norms, said government sources. The scope of the word â€˜accommodationâ€™ was widened in September â€™01 to take into account changing lifestyles and salary packages. In sectors such as oil exploration, mining, prospecting and construction sites, accommodation in remote areas is now exempt from tax. Cars hired or owned by the employer and used for official purposes are not treated as perquisites in the hands of the employee if proper documents are maintained. The employer also has to give a certificate saying that the expenditure was incurred wholly and exclusively for the performance of official duties. So is the case if an employee owns the car and the actual running and maintenance charges are for official purposes and are reimbursed by the employer. Here again, supporting documents and certificates have to be provided. Tax authorities are increasingly finding it tough to check the veracity of these claims. A car owned or hired by the employer and partly used for official and partly for personal purposes is treated as a perquisite, considering a notional amount, as the distinction cannot be exactly determined. In such a case, where user details are not available and the car is used for both official as well as private purposes, a sum of Rs 1,200 or Rs 1,600 per month, depending upon the engine capacity, is considered as income for valuation as a perquisite. If a chauffeur is provided, the sum goes up by another Rs 600 per month irrespective of the amount paid to the driver. When running and maintenance expenses are paid by the employee, the amount taken as income drops to Rs 400 per month and Rs 600 per month respectively. Credit card expenses incurred to entertain customers and clients are exempt from tax, subject to maintenance of documents. Similar is the case with club expenditure as those amounts are for official purposes supported by details and employers certificate. Health club and sports facilities provided to all class of employees by the employer at the latterâ€™s premises are exempt from tax. In the case of transfer of assets to the employee, the difference between the original cost of the movable asset deducted by the normal wear and tear and the sum if any paid by the employee is taken as the value of the perquisite. The value of free service of all personal attendants, including sweeper, gardener, watchman, is at actual cost to the employer. For employees who are provided with vacation and holiday facilities, the value of the perquisite is the expenditure incurred by the employer. Gifts valued at up to Rs 5,000 are also exempt, beyond which it would be treated as a perquisite.

Govt all set to axe freebies on perks

Perks like accommodation, cars, interest on loans, educational facilities & use of laptops may come under scanner.

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