Perquisites – Sec. 17(2) | PY 2024

§1 — Basic Concepts & Taxability Logic

Meaning of Perquisite [Sec. 17(2)]

Any benefit/facility given by employer to employee (or his household member) in addition to salary/wages
Must arise by reason of employment
Can be in cash or kind
Given by: employer / former employer / prospective employer / any person on behalf of employer
Household member = spouse, children & their spouses, parents, servants & dependants

⚡ Key Formula

Value of Perquisite = Amount taxable under head "Salaries"
(as per Sec. 15 → Sec. 17(2) → Rule 3)

Monetary vs Non-Monetary

Type	Meaning	Tax Treatment
Monetary	Cash / cheque / reimbursement	Always taxable; full value
Non-Monetary	Benefits in kind (car, house, food)	Taxable as per Rule 3 valuation

⚠ TRAP

Reimbursement of personal expenses = Monetary perquisite → fully taxable

Reimbursement of official expenses = NOT a perquisite at all

Taxability Flowchart — Mini Decision Tree

Is the benefit received by virtue of employment?

→ NO → Not a perquisite; not taxable under salary

→ YES ↓

Is it specifically EXEMPT under Sec. 10 or Rule 3?

→ YES → FULLY EXEMPT — Not Taxable

→ NO ↓

Is it a "non-monetary" perquisite for a NON-SPECIFIED employee?

→ YES → NOT Taxable (unless specifically covered)

→ NO ↓

Does Rule 3 apply for valuation?

→ YES → Taxable at Rule 3 Value

→ NO → Taxable at COST TO EMPLOYER

Specified vs Non-Specified Employee

Feature	Specified Employee	Non-Specified
Who	Director OR substantial interest (≥20% voting) OR salary > ₹50,000 p.a.	All other employees
Non-monetary perqs	TAXABLE	NOT taxable (unless listed)
Examples taxable only for SE	Sweeper, gardener, use of movable assets, transfer of assets	N/A

⚠ SALARY for ₹50,000 Test

= Basic + DA (if forming part) + Bonus + Commission + All taxable allowances − No deductions

Three Categories of Perquisites

Fully Exempt — Never taxable for anyone (e.g., medical insurance, laptop)
Fully Taxable — Always taxable for all employees (e.g., RFA, interest-free loan, ESOP)
Partially Taxable / Conditional — Taxable only for Specified Employees OR up to a limit

Rule 3 Key Principle

Rule 3 of Income Tax Rules, 1962 provides the method to VALUE perquisites for the purpose of inclusion in salary income.

§2 — Master Classification Table

Fully Taxable Perquisites — All Employees

Perquisite	Rule/Sec	Applicable To	Key Condition / Limit
Rent-Free Accommodation (RFA)	Rule 3(1)	All	Taxed by population/salary slab; see §4
Concessional Accommodation	Rule 3(1)	All	Taxed on difference from standard value
Interest-free / Concessional Loan	Rule 3(7)(i)	All	SBI rate benchmark; nil if loan ≤ ₹20,000 or medical loan
ESOP (Employee Stock Options)	Sec. 17(2)(vi)	All	FMV on exercise date − Exercise price
Motor Car (personal use by employer-owned)	Rule 3(2)	All	See car valuation table in §4
Free meals exceeding ₹50/meal	Rule 3(7)(iii)	All	Only excess over ₹50 per meal taxable
Gift/Voucher/Token > ₹5,000 p.a.	Rule 3(7)(iv)	All	Only amount exceeding ₹5,000 p.a. taxable
Credit card / Club membership (personal)	Rule 3(7)(vi)	All	Full amount taxable if personal use
Free education for child of employee (> ₹1,000/month per child)	Rule 3(5)	All	Cost exceeding ₹1,000/month per child taxable
Medical reimbursement exceeding ₹15,000	Proviso to Sec. 17(2)	All	Excess over ₹15,000 taxable (non-hospital)

Taxable Only for Specified Employees

Perquisite	Rule	Basis of Tax
Sweeper / Gardener / Watchman / Personal Attendant	Rule 3(3)	Cost to employer (actual salary paid)
Supply of Gas / Electricity / Water (own plant)	Rule 3(4)	Manufacturing cost
Supply of Gas / Electricity / Water (from outsider)	Rule 3(4)	Amount paid to outsider
Use of Movable Assets (other than car, laptop, AC)	Rule 3(7)(ii)	10% p.a. of cost (if owned) or hire charges (if hired)
Transfer of Movable Assets	Rule 3(7)(viii)	Cost − Depreciation − Amount recovered

⚠ TRAP — What is NOT taxable for Non-Specified Employees

Sweeper / Gardener / Attendant → Non-SE: NOT taxable

Use of movable assets → Non-SE: NOT taxable

Transfer of movable assets → Non-SE: NOT taxable

Fully Exempt Perquisites — Nobody Pays Tax

Perquisite	Condition
Telephone / Mobile (official or personal)	Fully exempt — No limit
Laptop / Computer provided for use	Fully exempt (use only, not transfer)
Transport facility by employer (not car/cab)	Rail/air — exempt for railways/airlines employees
Medical insurance premium (Group/Mediclaim)	Fully exempt
Refreshments / tea during office hours	Fully exempt
Scholarship for education of employee's child	Fully exempt
Subsidised food in remote area	Conditions apply under Rule 3(7)(iii)
Recreational facilities (not personal)	If for all employees — exempt
Employer's contribution to approved PF/Pension	Within prescribed limits — exempt
Leave travel concession (Sec. 10(5))	Exempt within limits, twice in 4-year block
Medicines/treatment in approved hospital	Fully exempt (Rule 3A)
Use of club for official purposes	Exempt if official use

§3 — Meaning of Salary (Case-Wise) — Critical Table

⚡ KEY PRINCIPLE

"Salary" does NOT mean the same thing for all perquisites. The composition of "salary" differs perquisite to perquisite. Always identify which definition applies before computing.

Salary Meaning — Perquisite-Wise Comparison

Perquisite / Case	Salary Relevant?	Meaning of Salary (Includes)	Excludes	Exam Note
RFA — Non-Govt Employee (owned/leased)	YES	Basic + DA (if forming part of retirement benefits) + Taxable allowances + Bonus + Commission + All monetary payments	Employer's PF contribution, D.E.A., perquisite value itself, non-monetary benefits	This is the BROADEST definition of salary
Specified Employee test	YES	Basic + DA (forming part) + Bonus + Commission + All taxable allowances	Perquisites, non-monetary allowances exempt under Sec. 10	Threshold: > ₹50,000 p.a.
Motor Car (employer owned, mixed use)	NO	Fixed amount based on CC of engine — no salary reference	—	Flat rates apply; salary irrelevant
Free Education	NO	Not salary-based — absolute limit ₹1,000/month/child	—	Cost of education is the benchmark
Sweeper / Gardener	NO	Actual cost to employer (salary of servant)	—	Only specified employees; cost = taxable value
RFA — Govt Employee	YES	Basic Pay + DA (forming part) only	HRA, allowances, bonus, commission, other perquisites	Narrowest definition; license fee is deducted from this
Hotel accommodation	YES	Same as Non-Govt RFA (broad)	Same as Non-Govt RFA	Lower of 24% of salary or actual hotel bill, minus recovery
Interest-free loan	NO	SBI rate × outstanding loan amount	—	Salary not relevant; benchmark = SBI rate
ESOP	NO	FMV on exercise date − Exercise price	—	Salary not relevant; market price determines value

Salary for RFA — Full Computation

SALARY for Non-Govt RFA (Rule 3(1)(b))

= Basic Salary
+ Dearness Allowance (forming part of retirement benefits)
+ All taxable monetary allowances (HRA if not used for rent, etc.)
+ Bonus + Commission + Fees
+ All other monetary payments that are taxable
EXCLUDE: Non-monetary perquisites, Employer's PF, Exempt allowances

SALARY for Govt Employee RFA (Rule 3(1)(a))

= Basic Pay + DA (forming part of retirement benefits) ONLY
EXCLUDE: Allowances, commission, bonus, other perquisites, HRA

§4 — RFA & Motor Car Valuation (Most Important)

Rent-Free Accommodation (RFA) — Rule 3(1)

Category	Valuation Formula	Recovery Adjustment
Govt Employee Any accommodation	License fee determined by Govt	− Rent actually paid by employee
Non-Govt — OWNED by employer Population ≤ 10 lakh	7.5% of Salary	− Rent paid by employee
Non-Govt — OWNED by employer Population >10 lakh but ≤ 25 lakh	10% of Salary	− Rent paid by employee
Non-Govt — OWNED by employer Population > 25 lakh	15% of Salary	− Rent paid by employee
Non-Govt — LEASED/Hired by employer	Lower of: (15% of Salary) OR (Actual Lease Rent)	− Rent paid by employee
Hotel Accommodation	Lower of: (24% of Salary) OR (Actual hotel charges)	− Amount paid by employee

FURNISHED Accommodation Extra

If accommodation is furnished:
+ 10% p.a. of cost of furniture (if owned by employer)
OR + Actual hire charges of furniture (if hired)
− Amount paid by employee for furniture

Part-Year Rule

If accommodation is provided for PART of the year:
Salary = only for that period
% applied on proportionate salary
(E.g., provided for 9 months → 9/12 of annual salary)

⚠ COMMON MISTAKES — RFA

Using full-year salary when accommodation was for part year

Including exempt allowances in "salary" for RFA

Using DA when it does NOT form part of retirement benefits

Forgetting to subtract rent recovered from employee

Applying population % to LEASED accommodation — use lower of 15%/actual for leased

Using Govt formula for Non-Govt and vice versa

✓ EXAM TIP — Hotel Stay ≤ 15 Days After Transfer

If employer provides hotel accommodation for ≤ 15 days on transfer of employee → Fully EXEMPT. Hotel accommodation is otherwise taxable as above.

Motor Car Valuation — Rule 3(2) — All Cases

Car Owned/Hired by EMPLOYER — Monthly Fixed Rate

Car Engine Capacity	Official Use Only	Personal Use Only	Mixed Use (with driver)	Mixed Use (without driver)
Up to 1600 cc	NIL	Actual exp by employer − Amount paid by employee	₹1,800 + ₹900 (driver) = ₹2,700/month	₹1,800/month
Above 1600 cc	NIL	Actual exp by employer − Amount paid by employee	₹2,400 + ₹900 (driver) = ₹3,300/month	₹2,400/month

Car Owned by EMPLOYEE — Employer Pays Expenses

Use	Taxable Amount
Official use only	NIL — Employer pays all expense; no perquisite
Personal use / Mixed use (≤1600 cc, no driver)	Actual expense by employer − ₹1,800/month
Personal use / Mixed use (≤1600 cc, with driver)	Actual expense by employer − ₹2,700/month
Personal use / Mixed use (>1600 cc, no driver)	Actual expense by employer − ₹2,400/month
Personal use / Mixed use (>1600 cc, with driver)	Actual expense by employer − ₹3,300/month

⚠ CAR EXAM TRAPS

Driver salary: ₹900/month is added ONLY when employer provides driver

Official use only → ALWAYS NIL (even employer-owned car with full expenses)

For employer-owned, personal use only → use actual cost method, not fixed rate

Mixed use means car used for BOTH official AND personal purposes

Monthly rates must be multiplied by no. of months car was available

STEP-WISE Car Valuation (Mixed Use, Employer-Owned, ≤1600 cc)

Step 1: Note engine CC → ≤1600 cc → ₹1,800/month
Step 2: Driver provided? YES → Add ₹900/month
Step 3: Total = ₹2,700/month
Step 4: × Number of months available
Step 5: − Amount recovered from employee
= Taxable Perquisite Value

§5 — Other Major Perquisites (Valuation & Rules)

Interest-Free / Concessional Loan — Rule 3(7)(i)

VALUATION FORMULA

Perquisite Value = (SBI lending rate − Rate charged by employer) × Maximum outstanding balance during the month

Maximum outstanding balance = Highest amount of loan outstanding on the last day of each month during PY
OR = Average of loan outstanding at beginning and end of each month (if employer prefers)

SBI rate = Rate charged by SBI on similar loans on the 1st day of PY (i.e., 1 April 2024)
EXEMPT if: Aggregate loan ≤ ₹20,000
EXEMPT if: Loan for medical treatment of specified disease (as per Rule 3A) — regardless of amount
Covers ALL types of loans (house loan, car loan, personal loan, etc.)

⚠ TRAP

₹20,000 is aggregate of ALL loans, not per loan

Use SBI rate on 1st April of the PY — not current year rate

ESOP — Employee Stock Option Plan [Sec. 17(2)(vi)]

VALUATION — At Exercise Date

Perquisite = (FMV on date of exercise) − (Amount paid by employee as exercise price)
× Number of shares allotted

Taxable in the year of exercise (not grant, not vesting)
FMV for listed shares = average of opening & closing price on recognised stock exchange on exercise date
FMV for unlisted shares = determined by SEBI-registered merchant banker
Later, when shares are SOLD → Capital Gains tax applies; cost = FMV on exercise date

⚠ TRAP

Grant date has NO tax consequence

Vesting date has NO tax consequence

Exercise date = taxable as salary perquisite

Sale of shares = capital gain (not salary)

Free / Concessional Education — Rule 3(5)

VALUATION

If school is owned/maintained by employer:
Perquisite = Cost of education in similar schools in locality − ₹1,000/month/child − Amount paid by employee

If school is NOT owned by employer (fees paid to external school):
Perquisite = Actual fees paid by employer − ₹1,000/month/child − Amount paid by employee

Limit: ₹1,000 per month per child is exempt
Applies to children of employee, not employee himself
Scholarship for education of employee/child = fully EXEMPT

Use of Movable Assets — Rule 3(7)(ii)

Taxable only for Specified Employee
Assets owned by employer: 10% p.a. of cost
Assets hired by employer: Actual hire charges
Less: Amount recovered from employee

✓ EXEMPT Assets

Laptop, Computer, Mobile phone — Fully EXEMPT (use only; not transfer)

Transfer of Movable Assets — Rule 3(7)(viii)

Taxable only for Specified Employee

Depreciation Method

Computers/Electronics: 50% WDV per year
Motor Car: 20% WDV per year
Other Assets: 10% SLM per year

Perquisite = (WDV at time of transfer) − (Price paid by employee)

Gift / Voucher / Token — Rule 3(7)(iv)

RULE

Gift in cash = Fully taxable (treated as monetary perquisite)
Gift in kind / voucher / token ≤ ₹5,000 p.a. = EXEMPT
Gift in kind / voucher / token > ₹5,000 p.a. = Excess over ₹5,000 is TAXABLE

⚠ TRAP

Cash gifts are ALWAYS fully taxable — no ₹5,000 exemption

₹5,000 limit is for entire year (all gifts combined), not per gift

Free Food / Lunch — Rule 3(7)(iii)

Situation	Treatment
Free meals/lunch during working hours (up to ₹50/meal)	EXEMPT
Meals exceeding ₹50/meal	TAXABLE — only excess over ₹50
Tea/snacks in office hours	FULLY EXEMPT
Meals in remote area / offshore site	FULLY EXEMPT

Sweeper / Gardener / Watchman / Attendant — Rule 3(3)

Taxable only for Specified Employee
Value = Actual salary paid to such domestic servant by employer
Less: Amount recovered from employee
Each servant treated separately

⚠ TRAP

If employee himself hires servant and employer reimburses → treated as monetary perquisite (fully taxable for all)

Electricity / Gas / Water — Rule 3(4)

Taxable only for Specified Employee
If supplied from own source (employer's plant): Value = Manufacturing cost
If purchased from outside agency: Value = Amount paid to outside agency
Less: Amount recovered from employee

Medical Facilities — Sec. 17(2) Proviso

Type of Medical Facility	Treatment
Treatment in employer's hospital	FULLY EXEMPT
Treatment in Govt / local authority hospital	FULLY EXEMPT
Treatment in approved hospital for prescribed disease	FULLY EXEMPT
Group medical insurance (Mediclaim)	FULLY EXEMPT
Medical reimbursement for treatment elsewhere	Up to ₹15,000 → EXEMPT; Excess → TAXABLE
Medical facility outside India (approved by RBI)	FULLY EXEMPT (with conditions)

§6 — Specified Employee — Definition & Decision Chart

Who is a Specified Employee? [Sec. 17(2)(iii)]

An employee is a Specified Employee if ANY ONE of the following conditions is satisfied:

3 CONDITIONS (ANY ONE = Specified)

Condition 1: Director of the employer company

Condition 2: Has substantial interest in employer company
= owns ≥ 20% of voting power (at any time during PY)

Condition 3: Salary > ₹50,000 p.a.
(Salary here = Basic + DA (forming part) + Bonus + Commission + All taxable allowances)

Is the employee a Director?

YES → SPECIFIED EMPLOYEE

NO ↓

Does he hold ≥20% voting power?

YES → SPECIFIED EMPLOYEE

NO ↓

Is salary > ₹50,000 p.a.?

YES → SPECIFIED EMPLOYEE

NO → NON-SPECIFIED

Perquisites Taxable ONLY for Specified Employees

Perquisite	SE Tax Treatment	Non-SE Tax Treatment	Rule
Sweeper / Gardener / Watchman / Attendant	TAXABLE at cost to employer	NOT TAXABLE	Rule 3(3)
Gas / Electricity / Water	TAXABLE at cost / amount paid	NOT TAXABLE	Rule 3(4)
Use of movable assets (other than exempt)	TAXABLE at 10%/hire	NOT TAXABLE	Rule 3(7)(ii)
Transfer of movable assets	TAXABLE at WDV − price	NOT TAXABLE	Rule 3(7)(viii)

✓ MEMORY TIP — "SGU-T" for Specified Employee

Servants (sweeper etc.) | Gas/Water/Electricity | Use of movable assets | Transfer of movable assets

⚠ IMPORTANT — What's Always Taxable for ALL (including non-SE)

RFA / Concessional accommodation

Motor car (personal/mixed use)

Interest-free/concessional loan

ESOP

Free education (above ₹1,000/month/child)

Gifts above ₹5,000 (in kind)

Free meals above ₹50/meal

§7 — Important Exempt Perquisites (Full List)

Fully Exempt — Quick Reference (PY 2024–25)

#	Perquisite	Condition for Exemption	Sec/Rule
1	Mobile / Telephone	No condition — fully exempt	Rule 3(7)(ix)
2	Laptop / Computer (use only)	Use only; NOT transfer of ownership	Rule 3(7)(ii)
3	Medical insurance / Mediclaim	Premium paid by employer	Sec. 17(2)
4	Scholarship for education	For employee or children	Sec. 10(16)
5	Tea / snacks (office hours)	During working hours	Rule 3(7)(iii)
6	Free meals in remote area	Area without normal facilities	Rule 3(7)(iii)
7	Uniform / dress allowance	Provided by employer for official duty	Sec. 10(14)
8	Gift in kind ≤ ₹5,000 p.a.	Non-cash; within ₹5,000 per year total	Rule 3(7)(iv)
9	Transport by employer (railway/airline employees)	Free/concessional travel for personal purpose	Sec. 10(14)
10	Leave travel concession (LTC)	Conditions of Sec. 10(5): domestic travel, twice in 4-year block	Sec. 10(5)
11	Recreational / sports facilities	Must be available to ALL employees equally	Rule 3(7)
12	Medical treatment (employer's hospital)	No limit; fully exempt	Sec. 17(2)
13	Medical treatment (Govt hospital)	No limit; fully exempt	Sec. 17(2)
14	Club use for official purpose	Must be purely official use	Rule 3(7)
15	Employer's PF contribution (within limit)	Up to 12% of salary	Sec. 10(11/12)

✓ MEMORY TRICK — "MLTSG-URT" for Key Exemptions

§8 — Solved Practical Illustrations

📝 Illustration 1 — Rent-Free Accommodation (RFA)

Question: Mr. Sharma is employed with ABC Pvt. Ltd. (non-govt) in Mumbai (population >25 lakh). He receives: Basic Salary: ₹6,00,000 p.a. | DA (forming part of retirement benefits): ₹1,20,000 | HRA: ₹60,000 (fully taxable) | Bonus: ₹30,000 Employer provides a furnished accommodation (company-owned). Cost of furniture: ₹1,20,000 (owned by employer). Employee pays ₹2,000/month as rent. Accommodation available for full year.

STEP 1: COMPUTE SALARY for RFA

Basic Salary: ₹6,00,000
+ DA (forming part): ₹1,20,000
+ HRA (taxable): ₹60,000
+ Bonus: ₹30,000
= Salary for RFA: ₹8,10,000

STEP 2: VALUE OF RFA (UNFURNISHED)

Mumbai population >25 lakh → Rate = 15%
15% of ₹8,10,000 = ₹1,21,500

STEP 3: ADD FURNITURE PERQUISITE

Employer-owned furniture: 10% of ₹1,20,000 = ₹12,000

Value of RFA (unfurnished)	₹1,21,500
Add: Furniture perquisite (10% of ₹1,20,000)	₹12,000
Less: Rent paid by employee (₹2,000 × 12)	(₹24,000)
Taxable Perquisite Value of RFA	₹1,09,500

✅ ANSWER: Taxable Perquisite = ₹1,09,500

✓ EXAM TIP

Always compute salary first. HRA is included in salary for RFA even if partially exempt elsewhere. Don't forget furniture add-on and recovery deduction.

📝 Illustration 2 — Motor Car Perquisite

Question: Mr. Gupta receives the following from his employer during PY 2024–25: (a) Employer-owned car (1800 cc engine), used for MIXED purpose (official + personal), driver provided by employer — available for full year. (b) Another car (1200 cc), owned by Mr. Gupta personally — employer pays ₹72,000 p.a. as running/maintenance expenses. Car used for mixed purposes. No driver. He pays ₹500/month to employer for car (a). Compute car perquisite.

CAR (a) — Employer owned, 1800 cc, mixed use, with driver

Engine >1600 cc → ₹2,400/month
Driver provided → Add ₹900/month
Total: ₹3,300/month × 12 = ₹39,600
Less: Recovery from employee (₹500 × 12) = ₹6,000

CAR (b) — Employee owned, 1200 cc, employer pays expenses, mixed use, no driver

Actual expense by employer = ₹72,000
Less: Deemed official portion (≤1600 cc, no driver) = ₹1,800 × 12 = ₹21,600

Car (a) — Employer Owned
Fixed perquisite (₹3,300 × 12)	₹39,600
Less: Recovery (₹500 × 12)	(₹6,000)
Car (a) Perquisite	₹33,600
Car (b) — Employee Owned
Employer's expense	₹72,000
Less: Exempt (₹1,800 × 12)	(₹21,600)
Car (b) Perquisite	₹50,400
Total Car Perquisite	₹84,000

✅ ANSWER: Total Car Perquisite = ₹84,000

✓ EXAM TIP

For employee-owned car, subtract the fixed exempt amount from actual employer expenses. For employer-owned car, ignore actual expenses and use fixed monthly rate.

📝 Illustration 3 — Mixed Perquisites Computation

Question: Mr. Verma is a Specified Employee of XYZ Ltd. During PY 2024–25 he received: Basic: ₹4,80,000 | DA (forming part): ₹96,000 | Bonus: ₹48,000 Perquisites: (1) Interest-free loan of ₹2,00,000 for house (SBI rate 8.5% p.a., outstanding throughout year) (2) Gift of washing machine worth ₹12,000 (3) Gardener's salary paid by employer: ₹36,000 p.a. (4) Free meals: 200 working days, ₹120 per meal (5) Laptop provided for use Compute total taxable perquisites.

WORKING NOTES
1. Loan perquisite	8.5% × ₹2,00,000	₹17,000
2. Gift (washing machine)	Exceeds ₹5,000 → ₹12,000 − ₹5,000	₹7,000
3. Gardener (SE only)	Actual cost = ₹36,000	₹36,000
4. Free meals	(₹120 − ₹50) × 200 days = ₹70 × 200	₹14,000
5. Laptop	Fully EXEMPT — use only	NIL
Total Taxable Perquisites		₹74,000

✅ ANSWER: Total Taxable Perquisites = ₹74,000

✓ EXAM TIP

Always check: (1) Is employee specified? → determines gardener/utilities. (2) Apply ₹5,000 exemption only to non-cash gifts. (3) Laptop/mobile always exempt — common distractor. (4) Meals: only excess over ₹50/meal taxable.

§9 — Final Revision Toolkit

Critical Formulas at a Glance

RFA — Non-Govt Owned

7.5% / 10% / 15% of Salary (by population) − Recovery

RFA — Non-Govt Leased

Lower of [15% of Salary] or [Actual Rent] − Recovery

Hotel

Lower of [24% of Salary] or [Actual Hotel Bill] − Recovery

Car (Emp-Owned, Mixed, ≤1600cc, with driver)

(₹1,800 + ₹900) × Months − Recovery

Car (Emp-Owned, Mixed, >1600cc, with driver)

(₹2,400 + ₹900) × Months − Recovery

Interest-Free Loan

SBI Rate × Max. Outstanding Balance

ESOP

(FMV on Exercise Date − Exercise Price) × Shares

Movable Asset Use

10% × Cost p.a. (owned) | Hire charges (hired)

Movable Asset Transfer

WDV − Price paid (WDV uses 50%/20%/10% dep.)

Sum-Solving Checklist

Step 1: Identify if employee is Specified or Non-Specified
Step 2: Compute "Salary" as per relevant definition for each perquisite
Step 3: Check taxability status (Fully taxable / Exempt / SE-only)
Step 4: Apply Rule 3 valuation formula
Step 5: Subtract recovery from employee
Step 6: Apply applicable limits (₹50/meal, ₹5,000 gift, ₹20,000 loan, ₹1,000/child education)
Step 7: For part-year benefits, prorate salary accordingly
Step 8: Sum all perquisites to get total taxable perquisite value

⚡ Master Memory Chart — All Limits in One Place

Perquisite	Exempt Limit	Taxable Beyond
Gift/Voucher (non-cash)	₹5,000 p.a.	Excess
Free meals	₹50 per meal	Excess per meal
Interest-free loan	₹20,000 aggregate	SBI rate on excess
Free education (child)	₹1,000/month/child	Cost above this
Medical reimbursement	₹15,000 p.a.	Excess
Hotel (after transfer)	15 days — Fully exempt	After 15 days
LTC	Twice in 4-year block	Beyond limit
Laptop/Computer	Full — No limit	Nothing
Mobile/Telephone	Full — No limit	Nothing
Driver perquisite (add-on)	N/A	₹900/month extra

⚠ Top 10 Exam Mistakes — Avoid These!

#	Mistake	Correct Rule
1	Using same "salary" definition for all perquisites	Salary definition differs — always identify the right one
2	Taxing laptop/mobile as perquisite	Both are FULLY EXEMPT
3	Taxing cash gift under ₹5,000 exemption	₹5,000 exemption is ONLY for non-cash gifts/vouchers
4	Taxing gardener/servant for non-specified employee	Only taxable for SPECIFIED EMPLOYEES
5	Using "actual expenses" for employer-owned car in mixed use	Use FIXED monthly rates; ignore actual expenses
6	Taxing ESOP at grant date or vesting date	Tax only at EXERCISE DATE
7	Not subtracting employee's recovery from perquisite value	Always deduct amount paid/recovered from employee
8	Including DA in govt employee RFA salary	Govt → only Basic + DA (forming part); no allowances
9	Applying population % for leased accommodation	Leased = Lower of 15% of salary OR actual rent
10	Treating all loans as taxable	Loans ≤₹20,000 (aggregate) or for prescribed disease = EXEMPT

Population-Slab Quick Memory

RFA % for Non-Govt Employer-OWNED Accommodation

≤ 10 lakh population → 7.5%
10 lakh < pop ≤ 25 lakh → 10%
> 25 lakh → 15%

Mnemonic: "7-10-15 like over: Small, Medium, Metro"

Depreciation Rates for Transfer of Movable Assets

Asset Type	Method	Rate
Computers / Electronic items	WDV	50% p.a.
Motor Car	WDV	20% p.a.
All Other Assets	SLM	10% p.a.

✓ Mnemonic: "CE-50, Car-20, Others-10"

⚡ PERQUISITES UNDER SALARY — SEC. 17(2) & RULE 3