Your salary is not always just your salary. Some benefits can become taxable too.
Company-provided accommodation, ESOPs, loans, gifts, club facilities, free food and other employment benefits may create a taxable perquisite under the Income-tax Act 2025.
Perquisites are benefits or amenities provided to an employee because of employment. They may not appear as cash salary in the payslip, but they can still form part of taxable salary income.
The Income-tax Act, 2025, effective from 1 April 2026, specifically deals with perquisites under Section 17. Perquisites under Income-tax Act 2025 cover a wide range of employer-provided benefits and amenities, from accommodation and ESOPs to loans, gifts, food, club facilities and the use of employer-owned assets.
This article is designed as a master overview of perquisites. It explains what counts as a perquisite, who is a specified employee, the complete statutory categories under Section 17, and the broad taxability framework.
Detailed valuation calculations for accommodation, company cars and interest-free or concessional loans are covered separately in the related articles linked below.
What Is a Perquisite Under the Income-tax Act 2025?
A perquisite is broadly a benefit or amenity arising from employment that is covered by the statutory definition in Section 17.
- It may be provided in cash or, more commonly, as a non-cash benefit.
- It can be provided by the employer or through an employment-related arrangement.
- Its taxable value is generally determined according to the prescribed rules.
- Not every employee benefit is automatically taxable—the Act and Rules provide specific exclusions, thresholds and conditions.
Therefore, the correct question is not simply “Did my employer give me a benefit?” but rather: “Does that benefit fall within Section 17, and what do the prescribed rules say about its taxability and valuation?”
Section 17 — Perquisite
Section 17 of the Income-tax Act, 2025 sets out the statutory framework for perquisites. It covers specified benefits and amenities provided in connection with employment and also contains specific rules for particular categories of benefits.
The detailed valuation of many perquisites is prescribed under the Income-tax Rules, 2026, particularly the applicable valuation provisions.
Who Is a Specified Employee?
The expression specified employee is important because certain perquisite provisions apply specifically to employees falling within this category.
Under the statutory framework, an employee may be treated as a specified employee based on the prescribed conditions relating to directorship, substantial interest in the employer, or monetary salary threshold, as applicable.
Certain benefits—particularly specified employer-provided facilities and amenities—have different tax treatment depending on whether the employee is a specified employee.
The status should therefore be checked before applying the tax treatment to a benefit rather than assuming that the same rule applies identically to every employee.
Complete List of Perquisites Under Section 17
Section 17 covers a broad range of employment-related benefits. The table below provides a consolidated overview of the principal statutory categories without repeating the detailed valuation calculations covered in separate guides.
| Sl. No. | Perquisite Category | What It Covers | Broad Tax Treatment |
|---|---|---|---|
| 1 | Rent-free accommodation | Accommodation provided by the employer without rent to the employee, subject to the statutory conditions. | Taxable subject to prescribed valuation rules and applicable conditions. |
| 2 | Concessional accommodation | Accommodation provided by the employer at rent lower than the value determined under the prescribed rules. | Taxable based on prescribed valuation after considering employee recovery, where applicable. |
| 3 | Gas, electricity or water | Employer-provided or employer-paid household utilities in cases covered by the perquisite provisions. | Taxability depends on the statutory conditions and prescribed valuation. |
| 4 | Education facilities | Educational facilities or benefits provided by the employer for employees or specified family members, where covered. | Taxability depends on the applicable conditions and prescribed limits or valuation. |
| 5 | Domestic servants | Employer-provided servants such as a sweeper, gardener, watchman or personal attendant where covered. | Taxable where the statutory perquisite provision applies. |
| 6 | Motor car / automotive conveyance | Employer-provided motor car or other automotive conveyance used by the employee. | Taxability and valuation depend on the prescribed rules and nature of use. |
| 7 | Employer meeting employee’s obligation | Any payment or discharge by the employer of an obligation that was otherwise payable by the employee. | Generally taxable as a perquisite, subject to statutory exclusions. |
| 8 | Life insurance / annuity-related benefits | Amounts paid by the employer for life insurance or annuity arrangements, subject to specified statutory exceptions. | Tax treatment depends on the specific statutory provision and applicable exclusions. |
| 9 | ESOP / sweat equity shares | Sweat equity shares or specified securities allotted or transferred by the employer or former employer. | Taxable based on the prescribed valuation mechanism and applicable conditions. |
| 10 | Employer retirement-fund contribution | Employer contributions to specified retirement funds to the extent they exceed the prescribed aggregate threshold. | Taxable to the extent specified by the Act. |
| 11 | Annual accretion on excess contribution | Annual accretion, including interest or similar income, relating to the taxable excess contribution to specified retirement funds. | Taxable as prescribed under the Act and Rules. |
| 12 | Interest-free or concessional loan | Loan or advance provided by the employer to the employee at no interest or at a concessional rate. | Taxability and valuation depend on the prescribed rules and applicable exceptions. |
| 13 | Holiday facility | Holiday or travel facility provided or paid for by the employer for the employee or eligible family members, where covered. | Taxability depends on the statutory conditions and prescribed valuation. |
| 14 | Free food and refreshments | Free or subsidised food, refreshments or qualifying meal facilities provided by the employer. | Taxability is subject to the prescribed conditions and threshold. |
| 15 | Gifts, vouchers and similar benefits | Gifts, vouchers or similar benefits provided by the employer. | Taxability depends on the prescribed threshold and applicable rules. |
| 16 | Credit card facilities | Expenses or benefits arising from employer-provided credit card facilities, subject to the prescribed conditions. | Taxable where the benefit falls within the statutory provision, subject to applicable exclusions. |
| 17 | Club facilities | Employer-provided club membership, facilities or related expenses for the employee. | Taxability depends on the statutory conditions and prescribed exclusions. |
| 18 | Use of movable assets | Use of movable assets belonging to the employer or another person in circumstances covered by the provision. | Taxable based on prescribed valuation rules, subject to specified exclusions. |
| 19 | Transfer of movable assets | Transfer of specified movable assets by the employer to the employee. | Taxable based on the prescribed valuation after applicable depreciation and employee recovery. |
| 20 | Medical facilities | Medical treatment, medical facilities or employer-provided healthcare benefits covered by the statutory provision. | Tax treatment depends on the specific facility, conditions and statutory exclusions. |
| 21 | Other benefits or amenities | Other employment-related benefits or amenities specifically covered by Section 17. | Taxability depends on the applicable statutory provision and prescribed rules. |
Detailed Valuation Guides
This article intentionally does not reproduce the detailed valuation formulas for individual benefits. For the two major valuation topics already covered on TaxBizmantra, see:
Perquisite Valuation: Accommodation & Company Car
Detailed treatment of rent-free or concessional accommodation and employer-provided motor car benefits, including valuation principles.
Read the accommodation & company car valuation guide →Interest-Free Loan Perquisite & Other Salary Benefits
Detailed explanation of interest-free and concessional employer loans and related salary-benefit taxation.
Read the interest-free loan guide →Taxable vs Non-Taxable Perquisites
One of the most important points is that not every employee benefit automatically creates taxable income.
Section 17 identifies the relevant perquisite categories, while the Income-tax Rules prescribe valuation and, in appropriate cases, specific conditions or exclusions.
Benefits specifically covered by Section 17
- Rent-free or concessional accommodation
- Specified employer-provided utilities and facilities
- ESOPs and sweat equity
- Interest-free or concessional loans
- Specified excess retirement-fund contributions
- Specified gifts and vouchers
- Specified club and credit-card benefits
- Use or transfer of specified movable assets
Benefits subject to specific conditions
- Benefits falling within a statutory exemption or exclusion
- Facilities covered by prescribed thresholds
- Benefits where the employee bears or reimburses the prescribed amount
- Specified medical or welfare facilities satisfying the applicable conditions
- Other benefits for which the Rules prescribe a nil or reduced value
Step 1: Identify the benefit and determine whether it falls within Section 17.
Step 2: Check the applicable valuation rule and any statutory threshold, exception or exclusion.
Step 3: Determine the taxable value after considering employee recovery or other permitted adjustments.
Perquisite vs Salary, Allowance, Reimbursement & Profit in Lieu of Salary
Employment-related payments can look similar in practice but have different tax concepts. Understanding the distinction helps prevent incorrect classification.
Employer Reporting & TDS
Perquisites are not merely an employee-side tax calculation. Employers also have reporting and withholding responsibilities in relation to salary and taxable benefits.
Employer’s responsibility
Under Section 392(5)(a), the employer/payor is required to furnish the prescribed statement containing correct and complete particulars of perquisites and profits in lieu of salary, including their value, in the circumstances prescribed by law.
The prescribed statement is furnished in Form 123 where the applicable conditions are satisfied.
This means employees should compare their salary records with the employer’s reported perquisites and the amounts reflected in their tax documents before filing the return.
Perquisites: What Employees Should Remember
- Section 17 is the starting point for identifying perquisites under the Income-tax Act, 2025.
- A perquisite can be taxable even when the employee does not receive the benefit as cash.
- Not every benefit is automatically taxable. Thresholds, exclusions, conditions and valuation rules matter.
- Accommodation, company cars, ESOPs, loans, gifts, food, club facilities and employer-provided assets can all fall within the statutory framework.
- The taxable amount generally depends on the applicable valuation mechanism rather than simply the employer’s cost.
- Employee recovery or contribution can affect the final taxable value where the applicable rules permit it.
- Employer reporting and TDS records should be reconciled with the employee’s salary and tax records.
Frequently Asked Questions-Perquisites under Income-tax Act 202
A perquisite is an employment-related benefit or amenity covered by Section 17 of the Income-tax Act, 2025. Depending on the benefit, its taxable value is determined under the applicable provisions of the Act and Income-tax Rules, 2026.
No. Although a benefit may appear to be an employee benefit, its taxability depends on whether it falls within the statutory perquisite provisions and whether a specific exemption, threshold, exclusion or nil-value rule applies.
Section 17 of the Income-tax Act, 2025 deals with perquisites.
It can be. The tax treatment depends on the nature of use and the applicable valuation rules. The detailed valuation should be determined under the prescribed rules rather than simply treating the employer’s cost as the employee’s taxable benefit.
An interest-free or concessional loan can constitute a perquisite under Section 17, subject to the applicable statutory exceptions and valuation rules.
Yes, specified sweat equity shares or securities allotted or transferred by an employer or former employer are covered by the perquisite provisions, with valuation determined under the applicable rules.
No. The tax treatment depends on the nature of the expense, the purpose of the payment, whether it represents a personal benefit, and the specific exemption or valuation provisions applicable to it.
Employers have prescribed reporting and withholding obligations in relation to salary and taxable perquisites. Section 392(5)(a) requires the prescribed statement of perquisites and profits in lieu of salary in applicable cases, with Form 123 being the prescribed form.
Official Tax References
- Income-tax Department — Section 17: Perquisite
- Income-tax Department — Income from Salary
- Income-tax Department — Perquisites
- Income-tax Act, 2025 — official text
- Income-tax Rules, 2026 — prescribed valuation and related rules.
Reference note: The statutory provisions and prescribed rules should be checked for the relevant financial year before applying a perquisite valuation to an individual case.
This article is provided for general informational and educational purposes only. It is based on the Income-tax Act, 2025 and the applicable tax framework referred to above. Tax treatment of a specific employee benefit may depend on the exact nature of the benefit, the employee’s circumstances, applicable valuation rules, thresholds, exemptions and amendments effective for the relevant year.
This content should not be treated as legal, tax or professional advice. For a specific transaction or employment arrangement, readers should verify the applicable law and obtain professional advice where required.
