Jigar M. Patel
International Tax Attorney
While the option for availing concessional tax rates under the New Tax Regime has substantially curtailed the scope of enjoying tax-free allowances such as HRA, LTC and the like by salaried employees, there are a bunch of tax-free perquisites which still merit careful attention. If such perks can be meaningfully structured by an employer in the CTC offered to the employee, the overall remuneration package can be made more tax friendly.
Telephone & Laptops – Free from Tax Trap
Under the Income-tax Rules, any reimbursement (without any monetary ceiling) granted by an employer to his employee for telephone expenses (including a mobile phone), actually incurred by an employee is treated as an exempt perk. The inclusion of expenses on a mobile phone can logically cover data plans as well, offering a combo of call, SMS and wi-fi charges. Moreover, while the use by an employee of any movable asset belonging to the employer is treated as a taxable perk, free laptop or computer facility, so provided, enjoys complete tax exemption.
Gifts and Loans outside the Taxable Perk Net
The list of tax-exempt perks also includes the value of any gift, voucher or token in lieu of gift given by an employer to his employee or family member on ceremonial occasion, if the value of the same is less than Rs. 5,000 during the year.
Interest-free loans by an employer to his employee of petty amounts not exceeding Rs. 20,000 and any loan for medical treatment in respect of any diseases and ailments prescribed under the I.T. Rules, have also been kept outside the taxable perk net.
Reimbursement of Expenses for Conveyance & Entertainment
In the case of ‘CIT v/s. Kiran Shelat’ 235 ITR 635 (Guj.), the Gujarat High Court laid down that reimbursement by an employer of actual expenditure incurred by an employee for purposes of traveling, conveyance or entertainment while discharging his official duties do not result in any profit or gain to the employee and the same cannot be treated as a salary or perquisite u/s. 15 or 17 of the Income-tax Act.
Free food and non-alcoholic beverages provided to employees during working hours at office premises or through non-transferable paid vouchers for use at eating joints to the extent of Rs. 50 per meal also enjoy exclusion from valuation of taxable perks.
Travel Accessories Allowance held not to be a Perquisite
In the case of ‘CIT vs. Wipro Systems’ 325 ITR 234 (Kar.), the Karnataka High Court had occasion to consider the question, as to where the employer company had provided its employees Travel Accessories Allowance, whether it was a perquisite from which the company was liable to deduct tax at source. The Court held that so far as the expenses incurred by the company for providing travel accessories or communication and other accessories were concerned, such expenses were required to be incurred by the officers for business promotion and benefit of the company and could not be treated as any benefit to its employees. Therefore, the same did not fall under section 17(2)(iv) to be treated as a perquisite in the hands of the company’s officers.
