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.

Adding a Perquisite Head to Salary Structure

There are two ways to model a perquisite head

Perquisites which are available for use in this section are -
- Office Small Car for mixed use - paid by Employer - 1800 pm
- Office Big Car for mixed use - paid by Employer - 2400 pm
- Office Small Car Driver for mixed use - paid by Employer - 900 pm
- Office Big Car Driver for mixed use - paid by Employer -  900 pm
- Company accommodation unfurnished - 15% of salary
Please note that the driver perquisite is same 900 pm for a driver of small car or big bar, if you give a car and driver 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

Option 2 - perquisite heads can be claimed as salary reimbursements
Four perquisite heads can be used as Reimbursement heads which will enable employees to submit expenses incurred as Payroll claims. These heads are -
1. Employee Small Car for mixed use - reimbursed by Employer - 1800 pm
2. Employee Big Car for mixed use- reimbursed by Employer - 2400 pm
3. Employee Small Car and Driver for mixed use - reimbursed by Employer - 2700 pm
4. Employee Big Car and Driver for mixed use - reimbursed by Employer - 3300 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 voucher - Tax free perquisite value. The law is explained in Income Tax Circular20_2015 on page 19 in point 2a.

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 - 1800 x 12 = 22,400 - this will be added as a perquisite under Section 17(2)

 Company accommodation unfurnished

This section explains the process of addition rent free unfurnished accommodation given to an employee as a perquisite. This corresponds to option 1 listed above.

If an employee is eligible for  company accommodation perquisite then Payroll manager can enable perquisite to employee and manage his house rent details here. Perquisite value will be 15% of salary for him. You can select the heads which are included in salary from from setup "Deduction and Encashment" grid. Basic is select by default.

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.