All perquisites are normally taxed in hands of employee.

 

However, employer has an option to pay tax on such perquisites

  • If If Employer Pays tax then Exempt in Hands of Employee
  • No TDS To be Deducted on Employee’s Salary regarding such income
  • Employer cannot claim deduction regarding this tax paid while computing his PGBP income [section 40(a) (v)

Note:-

 (2) Normally if  Tax of employee is paid by employer, it is treated as employee’s income However this is not the case with Non-monetary perquisites .It is specifically exempt and no TDS is applicable

 

 

Steps to Compute Tax on Non Monetary Perquisites

Tax is computed at the average rate of tax on total income as shown below

  1. Compute income from salary
  2. Calculate tax
  3. Add cess
  4. Calculate total tax
  5. Calculate tax % i.e. (Total Tax/Income from Salary)
  6. Calculate Tax %*Monetary Perquisites

This amount can be paid by employer

 

Note

Tax Rate is on income from salary and not total income

Tax payable by employee =

Total tax

Less

Tax On non-monetary perquisites paid by employee

  1. Income Tax
  2. Tax Deducted at Source (TDS)
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides GST Training in Delhi. Register now.