Perquisites: the benefits that are taxed even when nobody called them pay
Non-cash benefits provided by an employer that carry a taxable value in the employee's hands, valued under prescribed rules.
What They Are
Benefits in kind — accommodation, a car, concessional loans, ESOPs, club memberships — each with a prescribed valuation rule.
Valuation Is Specific
Accommodation depends on owned or leased and on city population. A car depends on engine capacity and on who drives it.
The Common Error
Adding an annual perquisite value as though it were monthly — inflating taxable income twelvefold.
Perquisites are benefits an employer provides in kind rather than in cash: accommodation, a car, subsidised or interest-free loans, free utilities, club memberships, employee stock options. Each carries a valuation rule under the Income-tax Rules, and the resulting value is added to the employee's taxable salary.
They are reported to the employee on Form 12BA, issued alongside Form 16.
The valuation rules are specific and not intuitive. Company accommodation is valued differently depending on whether the property is owned or leased by the employer and on the population of the city. A car is valued by engine capacity, by whether a driver is provided, and by whether use is personal, official or both.
The error that causes real disputes is arithmetic. The taxable value of a perquisite is added to annual salary as a whole amount — not multiplied across twelve months as though it were a monthly allowance. Treating an annual figure as monthly inflates taxable income twelvefold and produces a deduction the employee will, correctly, refuse to accept.
The second common miss is informality. A benefit given without paperwork is still a perquisite. If the company pays an employee's electricity bill, or lets them occupy a flat rent-free, that has a taxable value whether or not it appeared in the offer letter.
Perquisites FAQs
Are all benefits taxable as perquisites?
No. Certain benefits are exempt or carry concessional treatment within limits, and some reimbursements against actual expenditure are not perquisites at all. The treatment depends on the specific benefit.
Who gets a Form 12BA?
Employees whose salary exceeds the prescribed threshold and who have received perquisites. It is issued with Form 16 and itemises each perquisite and its value.
Does an informal benefit count?
Yes. A benefit provided in practice is a perquisite regardless of whether it was documented. Undocumented benefits are a common source of assessment findings precisely because nobody valued them.
Is a company car always a perquisite?
Its treatment depends on ownership, who bears running costs, and whether use is official, personal or both. Those permutations value very differently, which is why a single assumption rarely holds.
Do we have to value perquisites ourselves?
Yes — valuation rules are prescribed by head, and the employer computes and reports them. Leaving it to the employee to declare is not how the obligation works.
What about reimbursements?
A genuine reimbursement against evidence is treated differently from an allowance paid regardless of spend. Labelling an allowance a reimbursement does not change what it is.
Stop working this out by hand
Klok applies these rules on every payroll run, from your own attendance and salary data, with the working shown.