Managing perquisite components of salary

Managing perquisite components of salary

Menu : Payroll > Employee Details > Employee - Payroll Details
Accessible to : Payroll Manager

Perquisites fall under Section 17(2) of Income tax act. EazeWork HRMS has the capability to manage the taxation of these perquisite heads as per India tax laws. The perquisites given to an employee are shown as taxable amount in Form 16(12 BA) as Perquisite Value under appropriate heads.

There are two categories of perquisite heads which can be included as a part of salary
1. Car and driver : this is applicable when a car is used for both official and personal purposes. This can be further classified under two sections
a) when car  running and maintenance expenses are borne by the company
b) when car running and maintenance expenses are borne by the employee

2. Company accommodation : when rent free unfurnished accommodation is provided by the company to employee

1a. Company maintained car / driver

1. On Statutory Details tab select "Eligible for perquisite" as Yes and click on Submit at the bottom of page. A new tab "Perquisite Heads" will be shown in which the system defined perquisite heads are visible.


Perquisites which are available for use in this section are -
- Office Small Car (engine less than equal to 1.6 liters) for mixed use - paid by Employer - ₹5000 pm
- Office Big Car (engine more than 1.6 liters) for mixed use - paid by Employer - ₹7000 pm
- Office Small Car Driver for mixed use - paid by Employer - ₹3000 pm
- Office Big Car Driver for mixed use - paid by Employer -  ₹3000 pm
- Company accommodation unfurnished - 15% of salary

If you give a car and driver to the employee you will need to select the two heads accordingly.

2. Select the head you want to use and click on "Edit" button to input the date range from which this perquisite is being given.

1b. Employee maintained car / driver

When the car is maintained by the employee then the cost has to be claimed as payroll reimbursements and employees will have to to submit expenses incurred as claims. The value of tax-free perquisites is -

1. Employee Small Car for mixed use - reimbursed by Employer - ₹2000 pm
2. Employee Big Car for mixed use- reimbursed by Employer - ₹3000 pm
3. Employee Small Car and Driver for mixed use - reimbursed by Employer - ₹5000 pm
4. Employee Big Car and Driver for mixed use - reimbursed by Employer - ₹6000 pm

If any of the heads shown above are given to employee as a Reimbursement Claim head the taxable value of the perquisite will depend upon the claims submitted by the employee in EazeWork HRMS. Accountant will have to verify these claims. Refer to the article on Claiming reimbursements for more details.

Taxable amount added as perquisite in employee's salary = Amount claimed through vouchers - Tax free perquisite value.

Idea
Example

Suppose employee has "Employee Small Car for mixed use - reimbursed by Employer" in the salary as a Reimbursement head and the annual value of this head is INR 48,000.

Suppose employee claims INR 44,000 throughout the year then the taxable income would be

1. 48000 - 44000 = 4,000 which was not claimed - this will be paid only in March payroll
2. 44000 - 2000 x 12 = 20,000 - this will be added as a perquisite under Section 17(2)

2. Company accommodation unfurnished

This section explains the process of addition rent free unfurnished accommodation given to an employee as a perquisite. 


Perquisite value will be based on the City Type declared here 
- Metro : cities with population > 40 lakhs : 10% perquisite 
- Big Cities : cities with population > 15 lakhs but <= 40 lakhs : 7.5% perquisite 
- Other Places : all other places with population <= 15 lakhs as per 2011 census : 5% perquisite 

You can select the heads which are included in salary from from setup "Deduction and Encashment" grid. Basic is select by default.

Notes
Note - Refer to the article on Loans with perquisite to understand how perquisite value is calculated if loan is given at an interest rate less than market rate.

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