What is the tax treatment of perquisites and allowances received from an employer?

Perquisites provided by an employer are taxable in the hands of the employee as salary income, unless specifically exempt under Section 10. Common perquisites include rent-free accommodation, car for personal use, interest-free loans, and reimbursements. Allowances like HRA, LTA, medical reimbursement, and children’s education allowance are partially exempt under prescribed rules.

Legal Provisions: Sections 10, 15, 17(1), and 17(2) of the Income Tax Act, 1961

Supporting Case Law:
– CIT v. Shri Abad Bi Ahmed & Brothers (1974) – Supreme Court – 94 ITR 567
– Link: https://indiankanoon.org/doc/1197866/
– Ratio: This case laid down principles for taxability of perquisites and allowances received from an employer.

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Prashant Thakur

The author has spent more than 30 years in the field of taxation. Wrote four books -3 on on Indian Tax Law and 1 on US tax law for cryptocurrency. Apart from https:taxworry.com , he also writes on https://irstaxapp.com which is for US tax laws. He is a tech enthusiast and manages a cloud computing company that publishes innovative software.