Perquisite Tax in India — Taxable & Non-Taxable Perquisites Explained

Updated: 3 June 2026 | Income-tax Act, 2025 | Rule 3 — Perquisite Valuation

What are perquisites in income tax? Perquisites (perks) are non-cash benefits provided by an employer to an employee — taxable as part of salary under Section 17(2) of the Income-tax Act. Taxable perquisites include: employer-leased or employer-owned accommodation (perquisite valued at 7.5–15% of salary based on city population), company car for personal use (₹1,800–₹3,000/month fixed valuation), club membership fees paid by employer, ESOP exercise benefit (FMV minus exercise price), and school fee reimbursement. Tax-free perquisites include: laptop and mobile phone for official use, meal vouchers up to ₹50/meal, medical insurance premium paid by employer, and Group Term Life Insurance up to ₹50,000 sum assured.

ESOP

ESOPs, company car, and leased housing = taxable perquisites; TDS deducted by employer.
Laptop, official phone, and meal vouchers (up to ₹50/meal) are fully exempt from perquisite tax.

Taxable vs Non-Taxable Perquisites — Complete List

The table below covers all major employer perquisites with their tax status and valuation method under Rule 3 of the Income-tax Rules.

Perquisite	Tax Status	Valuation / Limit
Employer-owned accommodation	Taxable	15% of salary (pop >25L), 10% (10–25L), 7.5% (below 10L)
Employer-leased accommodation	Taxable	Lower of actual rent paid or above % of salary
Company car (personal use)	Taxable	₹1,800/mo (≤1600cc) or ₹2,400/mo (>1600cc) — employer-owned
ESOP exercise benefit	Taxable	FMV on exercise date minus exercise price = perquisite; TDS by employer
Club membership fees	Taxable	Actual fees paid by employer (except health clubs in office premises)
School/education fees for children	Taxable	Actual fees paid — exempt only if school is in employer's business premises
Medical reimbursement (non-hospitalisation)	Taxable	Amount exceeding ₹15,000 p.a. is taxable (hospitalisation is fully exempt)
Interest-free / concessional loan	Taxable	Difference between SBI lending rate and rate charged (loan > ₹20,000)
Laptop / desktop (official use)	Tax-Free	Fully exempt — no perquisite value added
Mobile phone (official use)	Tax-Free	Fully exempt — no perquisite value added
Meal vouchers	Tax-Free	Up to ₹50/meal (max 2 meals per working day) — excess is taxable
Health insurance premium	Tax-Free	Fully exempt — employer-paid Group Mediclaim is not a perquisite
Company car (official use only)	Tax-Free	No perquisite value if used exclusively for official purposes (log book maintained)
Group Term Life Insurance	Tax-Free	Premium for sum assured up to ₹50,000 is exempt; excess is taxable perquisite
Uniform allowance (official)	Tax-Free	Employer-provided uniforms for office use are exempt

Accommodation Perquisite — Detailed Valuation

Accommodation provided by an employer is one of the most significant perquisites for salaried employees. The valuation depends on whether the accommodation is employer-owned or employer-leased, and the population of the city where it is located.

City Population	Employer-Owned (% of Salary)	Employer-Leased
Above 25 lakh (metro)	15%	Lower of 15% of salary OR actual rent paid
10 to 25 lakh	10%	Lower of 10% of salary OR actual rent paid
Below 10 lakh	7.5%	Lower of 7.5% of salary OR actual rent paid

"Salary" for accommodation perquisite = Basic Salary + DA (if forming part of retirement benefits) + all taxable allowances + any commission based on fixed % of turnover. HRA, medical allowance, and other specific allowances are excluded.

Frequently Asked Questions

Is a company car a taxable perquisite?

Yes, a company car used for personal purposes (or both official and personal) is a taxable perquisite. The perquisite value is computed on a fixed monthly basis: for cars up to 1600cc, it is ₹1,800/month (employer-owned) or ₹2,400/month (employee-owned with employer meeting expenses). For cars above 1600cc, it is ₹2,400/month or ₹3,000/month respectively. If a driver is also provided, add ₹900/month. If the car is used exclusively for official purposes with a log book maintained, it is not taxable.

How is leased accommodation perquisite calculated?

For employer-leased accommodation, the perquisite value is the lower of: (a) actual lease rent paid by the employer, or (b) 15% of salary (for cities with population above 25 lakh), 10% of salary (10–25 lakh population), or 7.5% of salary (below 10 lakh population). For employer-owned accommodation, the perquisite is 15%, 10%, or 7.5% of salary depending on city population. "Salary" for this purpose means basic salary + DA (if forming part of retirement benefits) + commission.

Are meal vouchers (sodexo) taxable?

Meal vouchers (like Sodexo or similar) are exempt from tax up to ₹50 per meal, subject to a maximum of 2 meals per working day. Effectively, this works out to approximately ₹900–₹2,600 per month depending on working days. Any meal benefit exceeding this threshold becomes taxable as a perquisite. Employer-provided cafeteria meals at the workplace are similarly exempt up to ₹50 per meal.

How are ESOPs taxed as a perquisite?

ESOPs (Employee Stock Option Plans) are taxed at two stages: (1) At exercise — when you exercise the option and buy shares at the exercise price, the difference between the Fair Market Value (FMV) on the date of exercise and the exercise price is treated as a perquisite and taxed as salary income. TDS is deducted by the employer. (2) At sale — when you sell the shares, the profit (sale price minus FMV on exercise date) is taxed as capital gains (short-term or long-term depending on holding period).

How is a company phone taxed as a perquisite?

A mobile phone or laptop/tablet provided by the employer exclusively for official use is fully exempt from tax as a perquisite — no perquisite value is added to salary. This is a specific exemption under Rule 3 of the Income-tax Rules. However, if the phone is also used for personal calls and the employer bears the cost, the personal use portion can technically be treated as a taxable perquisite. In practice, most employers treat the entire phone/laptop benefit as tax-free.

Income Tax for Salaried ESOP Perquisite Tax TDS on Salary Income Tax Return Filing Form 16

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