Form 123 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Form 123 is the statement an employer gives an employee showing the perquisites, other fringe benefits or amenities and profits in lieu of salary, with their value. This article describes it as printed, as per the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026. Later notifications should be checked. The Rules use a different term for some entries of the perquisite Table than the one used here, so this article writes them as accommodation provided without rent, loans without interest and so on.
Rule 204(2) requires the person paying salary to give the employee a statement of perquisites or profits in lieu of salary and their value: in the relevant columns of Form 130 if the salary paid or payable for the tax year is not more than Rs. 150000, and in Form 123 if it is more than Rs. 150000. Form 123 has Part A (employer and employee) and Part B (23 rows), and a declaration signed by the person responsible for deduction of tax.
The rule and the sections
Rule 204(2) says the person responsible for paying any income under the head "Salaries" shall furnish the employee a statement giving correct and complete particulars of perquisites or profits in lieu of salary and their value, in clause (a) the relevant columns of Form 130 if salary for the tax year is not more than Rs. 150000, or in clause (b) Form 123 if it is more than Rs. 150000. Sub-rule (3) says "salary" for this rule has the meaning in rule 15. Our post on rules 204 and 205 covers the rule; the valuation of the perquisites themselves is in rule 15 and is not repeated here. The form prints no values; it asks for the value "as per rules".
Two sections of the Income-tax Act, 2025 sit behind it. Section 392 is the provision on tax deduction from salary and requires the payer to furnish a statement of perquisites or profits in lieu of salary in the prescribed form; see section 392. Section 17 deals with perquisites; see section 17. Profits in lieu of salary are in section 18, which the form names in its row 22.
Employers who issue this statement should check the valuation and the figures in the quarterly salary statement; our TDS compliance team does this review for payroll clients.
Part A: details of the employer and the employee
| Rows | Particulars |
|---|---|
| 1 to 6 | The employer: name (Note 1), address (Note 2), Permanent Account Number, tax deduction and collection account number, e-mail identity, contact number |
| 7 to 14 | The employee: name, designation, PAN; whether the employee is a director or a person with a substantial interest in the company (applicable where the employer is a company); income under the head "Salaries" other than from perquisites; e-mail identity; contact number; tax year |
Part B: valuation of perquisites
Part B is a table of five columns: A (row number), B (nature of perquisite, "see rule 15"), C (value of perquisite as per rules), D (amount, if any, recovered from the employee) and E (amount of perquisite chargeable to tax, being column C minus column D). The rows are as follows.
| Rows | Nature of perquisite as printed |
|---|---|
| 1 to 4 | Accommodation; cars and other automotive; sweeper, gardener, watchman or personal attendant; gas, electricity, water |
| 5 to 9 | Loans without interest or at a concessional rate; holiday expenses; travel without charge or at a concession; meals provided without charge; education provided without charge |
| 10 to 14 | Gifts, vouchers and the like; credit card expenses; club expenses; use of movable assets by employees; transfer of assets to employees |
| 15 | Value of any other benefit, amenity, service or privilege |
| 16 and 17 | Stock options allotted or transferred by an employer that is an eligible start-up referred to in section 140; stock options (non-qualified options) other than those in row 16 |
| 18 and 19 | Employer's contribution to a fund and scheme taxable under section 17(1)(h); annual accretion by way of interest, dividend and the like to the balance at the credit of the fund and scheme referred to in section 17(1)(i) |
| 20 | Other benefits or amenities |
| 21 | Total value of perquisites |
| 22 | Total value of profits in lieu of salary as per section 18 |
| 23 | Details of tax: (a) tax deducted from the employee's salary under section 392(1); (b) tax paid by the employer on behalf of the employee under section 392(2)(a); (c) total tax paid, being (a) plus (b); (d) date of payment into the Government treasury |
Row 23(b) corresponds to the option in section 392(2)(a), under which the payer may pay the tax on a non-monetary perquisite without deducting it from the employee; the section post explains the option.
The declaration and the Notes
The Declaration is made by a named person with a PAN, working in a stated designation, on behalf of the named employer. The declarant states that the information is based on the books of account, documents and other relevant records or information available with the employer, that the value of each perquisite is in accordance with section 17 and the profits in lieu of salary in accordance with section 18 of the Act and the rules framed under them, and that the information is true and correct. It is signed by "the person responsible for deduction of tax", with place, date, name and designation.
The Notes are short: Note 1 requires the name in full without abbreviations (for an individual, the first, middle and last name); Note 2 lists the address elements (country or region, flat or door or block number, road or street or block or sector, PIN or ZIP code, post office, area or locality, district, State); and Note 3 says amounts are in rupees unless otherwise provided.
What the form does not do
Form 123 does not contain the method for valuing each perquisite. The columns ask for the value "as per rules", and rule 15 is the place to read the method. It also does not print a time limit; the Rules do not fix one in rule 204(2). The statement is a document the employer prepares for the employee, and the figures usually need to agree with the salary details the employer reports elsewhere. How the employee uses the statement, for instance in giving details of income to a new employer, is in Form 122; see our article on Forms 122 and 124.
A short example
Meera Textiles Pvt Ltd pays its general manager, Mr Arjun Rao, a salary of more than Rs. 150000 for the tax year. Because the amount exceeds the figure in rule 204(2)(b), the company furnishes Form 123. In Part A it enters its own details and Mr Rao's, including his designation and whether he is a director. In Part B it records the value of the accommodation (row 1) and a car (row 2) as computed under the rules, the amount he recovered, and the chargeable balance; it fills row 21 with the total and row 23 with the tax deducted under section 392(1). The company's authorised person signs the declaration. No figure beyond Rs. 150000 is taken from the Rules; the values are the company's own working under rule 15.
Need help with perquisite valuation and employer statements?
Getting the value of each perquisite and the recovery from the employee right before the statement goes out saves corrections later. If you want a payroll review of these entries, our TDS compliance specialists can assist.
Key takeaways
- Form 123 is the employer's statement when salary paid or payable exceeds Rs. 150000; at or below that figure the relevant columns of Form 130 are used.
- Part B has 23 rows, with columns for value, recovery and the chargeable amount.
- Values are "as per rules"; the method sits in rule 15.
- Row 23 records the tax deducted and any tax the employer paid on the employee's behalf.
- The declaration is signed by the person responsible for deduction of tax.
Read next
- Forms 122 and 124: employee statement of income and claims
- Form 130: certificate of tax deducted on salary
- Rules 204 and 205: salary TDS particulars
- Section 17 of the Income-tax Act, 2025: perquisites
Disclaimer: Based on the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026, as consulted on 2 October 2026. It explains the words of the rules and forms only; later notifications, the forms and utilities on the e-filing portal, circulars and the way the tax authorities apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.