Perquisites are non-cash benefits an employer gives an employee and are taxed as salary income under Section 17(2), with values fixed by Rule 3 of the Income-tax Rules. Taxable perks include rent-free/concessional accommodation, a company car used personally, ESOPs, interest-free loans, club fees and school-fee reimbursement. Tax-free perks include a laptop or official mobile phone, employer-paid medical insurance and telephone bills. The taxable value is added to your salary and TDS is deducted by the employer.
Perquisites are taxable in both the old and new tax regime — opting into the new (default) regime does not make a company car or ESOP tax-free. What the new regime removes are salary exemptions like HRA and LTA; the standard deduction is ₹75,000 in the new regime and ₹50,000 in the old. Verify your figures on the Form 16 and income-tax slabs.
Taxable vs Tax-Free Perquisites
Every common employer benefit, its tax status under Section 17(2), and the Rule 3 valuation or limit that applies.
| Perquisite | Status | Valuation / Limit |
|---|---|---|
| Rent-free / concessional accommodation | Taxable | 10% of salary (employer-owned) or lower of that vs actual rent — Rule 3 |
| Company car (personal use, ≤1600cc) | Taxable | ₹1,800/mo (+ ₹900/mo if driver provided) |
| Company car (personal use, >1600cc) | Taxable | ₹2,400/mo (+ ₹900/mo if driver provided) |
| ESOP / sweat equity | Taxable | FMV on exercise date − exercise price; TDS at exercise |
| Interest-free / concessional loan | Taxable | SBI rate − rate charged, if loan > ₹20,000 |
| Club membership fees | Taxable | Actual fees paid by employer |
| School-fee reimbursement | Taxable | Actual amount (free education in employer's own school: exempt up to ₹1,000/child/mo) |
| Laptop / desktop (official use) | Tax-free | No perquisite value under Rule 3 |
| Mobile phone & telephone bills | Tax-free | Fully exempt — official communication |
| Employer-paid health insurance | Tax-free | Group Mediclaim premium is not a perquisite |
| Company car — exclusively official | Tax-free | Nil if a log book is maintained |
Rule 3 accommodation and car valuation were revised w.e.f. FY 2023-24. "Salary" for accommodation = basic + DA (if for retirement benefits) + taxable allowances + commission.
Rent-Free / Concessional Accommodation
Accommodation provided by a non-government employer is valued under the revised Rule 3 by the population of the city (2011 census). If the employer owns the house, the perquisite is a percentage of salary; if it is leased, it is the lower of that percentage or the actual rent paid. Any rent recovered from the employee is deducted.
| City population | Employer-owned | Employer-leased |
|---|---|---|
| Above 40 lakh | 10% of salary | Lower of 10% of salary or actual rent |
| 15 lakh to 40 lakh | 7.5% of salary | Lower of 7.5% of salary or actual rent |
| Below 15 lakh | 5% of salary | Lower of 5% of salary or actual rent |
Revised slabs and population bands apply from FY 2023-24 (earlier: 15%/10%/7.5% on 25L/10L bands). Furniture adds 10% p.a. of cost. Any rent recovered from the employee reduces the value.
If your employer gives you a rent-free flat, you cannot also claim the HRA exemption — HRA is for employees who pay rent themselves. Estimate the impact of either route with the HRA calculator before choosing your salary structure.
Employer accommodation or car on your CTC? Get the perquisite value checked.
Talk to a Tax Expert →ESOPs & Company Car — How They Are Taxed
ESOPs are taxed twice: once as a perquisite when you exercise the option, and again as capital gains when you sell the shares. Eligible startup employees get a deferral of the perquisite TDS (payable at the earliest of 5 years, sale, or leaving the company).
ESOP perquisite at exercise
Company car ≤1600cc (yearly)
The car perquisite is a flat Rule 3 value regardless of actual running cost — you are not taxed on fuel or maintenance separately when the employer meets all expenses. A car used only for official duties (with a log book) carries no perquisite value.
Perk is worth taking if
- The Rule 3 value is far below the real benefit (e.g. a car)
- ESOPs are in a company you expect to grow
- You would otherwise pay for the same benefit from taxed income
Watch out if
- ESOP TDS falls due before you can sell the shares
- A rent-free flat blocks a larger HRA exemption
- A concessional loan pushes taxable salary up unexpectedly
How Perquisites Appear in Your ITR
You do not compute perquisites yourself for most items — the employer values them under Rule 3, adds them to your gross salary, deducts TDS and reports them in Form 16 (Part B) and Form 12BA. You simply carry the figure into your return.
- Form 16 Part B from employer
- Form 12BA (perquisite statement)
- ESOP exercise / FMV certificate
- Rent-recovery proof (if any deducted)
- Car log book (for official-use claim)
- Loan sanction & interest details
- AIS / Form 26AS reconciliation
- Correct tax regime selected
Because the employer has already added the perquisite value to salary and deducted TDS, your gross salary in the ITR already includes it. Do not add it again as "other income". Verify the total against your Form 16 and AIS before filing.
Want us to reconcile Form 16, perquisites and AIS and file your return?
Get ITR Filing Help →Perquisite Tax — Frequently Asked Questions
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Perquisites, Form 16 & ITR — Handled by CAs
Company car, rent-free flat or ESOPs on your CTC? Our CA-led team values perquisites correctly under Rule 3, reconciles Form 16 and AIS, and files an accurate ITR — 100% online, across India.