Valuation of Perquisites for computing Salary income

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Perquisite may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. It also denotes something that benefits a man by going into his own pocket. Perquisites may be provided in cash or in kind. However, perquisites are taxable or its Valuation is under the head “Salaries” is possible only if they are :

  1. allowed by an employer to his employee;
  2. allowed during the continuance of employment;
  3. directly dependent upon service;
  4. resulting in the nature of personal advantage to the employee; and
  5. derived by virtue of employer’s authority.
Perquisites - Tax treatment for computing Salary Income
Perquisites – Tax treatment for computing Salary Income

Table of Contents

1. Valuation of Rent-Free Un-Furnished Accommodation

For the purpose of valuation of the perquisite in respect of unfurnished accommodation, employees are divided in the following two categories:

CASE-1 : Central and State Government Employees

CASE-2 : Private Sector Employees or Other Employees.

Valuation of Rent-Free Un-Furnished Accommodation
Valuation of Rent-Free Un-Furnished Accommodation

CASE-1 : Central and State Government Employees

Basis of Valuation of Perquisites-

The value of perquisite in respect of accommodation provided to such employee is equal to the licence fee which would have been determined by the Central or State Government in accordance with the rules framed by the Government for allotment of houses to its officers.

Exception (Exempt from Tax)-

  • Rent-Free official residence provided to a Judge of a High Court or to a Judge of the Supreme Court is exempt from tax.
  • Rent-Free official residence provided to an official of Parliament, a Union Minister, a Leader of Opposition in Parliament and serving Chairman/members of UPSC is exempt from tax

Category of Employees –

  • includes Central Government employees and State Government employees.
  • includes those Central Government employees and State Government employees who are on deputation to a public sector undertaking but the accommodation is provided by the Central Government or State Government.

CASE-2 : Private Sector Employees or Other Employees.

In this category, value of the perquisite in respect of rent-free accommodation depends on salary of the employee and lease rent of the accommodation.

Basis of Valuation of Perquisites-

Population of city as per 2001 census where accommodation is providedWhere the accommodation is owned by the employerWhere the accommodation is taken on lease or rent by the employer
If Populations > 25 Lakh15% of Salary in respect of the period during which the accommodation is occupied by the employeea. 15% of Salary ; or

b. Lease Rent ( paid or payable) by Employer,

whichever is Less
If Populations > 10 lakh but <= 25 lakh10% of Salary in respect of the period during which the accommodation is occupied by the employeea. 15% of Salary ; or

b. Lease Rent ( paid or payable) by Employer,

whichever is Less
Any other7.5 % of Salary in respect of the period during which the accommodation is occupied by the employeea. 15% of Salary ; or

b. Lease Rent ( paid or payable) by Employer,

whichever is Less

Salary – How to Calculate :

– Salary Includes …
  1. basic salary;
  2. dearness allowance/pay, if terms of employment so provide;
  3. bonus;
  4. commission;
  5. fees;
  6. all other taxable allowances (excluding amount not taxable); and
  7. any monetary payment which is chargeable to tax (by whatever name called).
– Salary Does Not Includes …
  1. dearness allowance/pay, if not taken into account while calculating retirement benefits, like provident fund, gratuity, etc., or if term of employment does not so provide;
  2. employer’s contribution to provident fund account of an employee;
  3. all allowances which are exempt from tax;
  4. value of perquisites [under section 17(2)]; and
  5. lump-sum payments received at the time of termination of service or superannuation or voluntary retirement, like gratuity, severance pay leave encashment, voluntary retrenchment benefits, commutation of pension and similar payments.
Important Points :
1. “Salary” shall be determined on “accrual” basis – In other words, salary accrued for the period during which rent-free accommodation is occupied by the employee will be considered, whether it is received during the previous year or not.

2. Salary from two or more employers – Salary from all employers in respect of the period during which an accommodation is provided will be taken into consideration.

3. Monetary payments v. Perquisites – Consider the following monetary payments —-

>> Payments of gas, electricity, water and income-tax bills [being perquisites under section 17(2)(iii)/(iv)] are not taken into consideration.-

>>Overtime payment (it is not a perquisite) is taken into consideration.

2. Valuation of Rent-Free Furnished Accommodation

The perquisite in respect of rent-free furnished accommodation may be provided in the following two different ways —

1. A Furnished Accommodation (not being in a Hotel, Motel, Service Apartment or Guest House) –

Value of the perquisite shall be calculated as follows —

  • Step 1 – Find out value of the perquisite on the assumption that the accommodation is unfurnished
  • Step 2 – To the value so arrived at, add value of furniture.

Value of furniture for this purpose is as follows—

  1. 10% per annum of the original cost of furniture, if furniture is owned by the employer;
  2. actual hire charges payable (whether paid or payable), if furniture is hired by the employer.

Meaning of furniture – “Furniture” here includes radio sets, television sets, refrigerators, air-conditioners and other household appliances.

2. A Furnished Accommodation in a Hotel, Motel, Service Apartment or Guest House –

The value of the perquisite is determined on the basis of lower of the following two —

  1. 24% of “salary” paid or payable for the period during which such accommodation is provided in the previous year.
  2. Actual charges paid or payable by the employer to such hotel.

Exception –

If an accommodation is provided in a hotel, motel, service apartment or guest house in the case of relocation of an employee from one place to another place, nothing is chargeable to tax for 15 days (in aggregate during the financial year).

3. Valuation of Accommodation provided at Concessional Rent

If an accommodation is provided to an employee at concessional rent, the valuation should be made as follows (these rules are applicable whether the accommodation is furnished or unfurnished or it is provided in a hotel) —

Step-1 : Find out the value of the perquisite on the assumption that no rent is charged by the employer

Step-2 : From the value so arrived at, deduct the rent charged by the employer from the employee.

The balance amount (if it is positive) is the taxable value of the perquisite in respect of concession in rent.

Valuation of Accommodation provided at Concessional Rent
Valuation of Accommodation provided at Concessional Rent

4. Valuation of Perquisite in respect of Interest-Free Loan or Loan at Concessional Rate of Interest [Section 3(7)(i)]

The valuation shall be the sum equal to the interest computed at the rate charged per annum by the State Bank of India, as on the 1st day of the relevant previous year in respect of loans for the same purpose advanced by it.

The above interest has to be calculated on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by employee or any such member of his household.

However, in the following cases, if such loans are made available to an employee or any member of his household, no value would be charged:

(a) where the amount of loans are petty not exceeding in the aggregate ₹20,000; or

(b) where the loan is for medical treatment in respect of diseases specified in rule 3A. However, in this case, the exemption, so provided, shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

1. “Maximum outstanding monthly balance” means the aggregate outstanding balance for each loan as on the last  day of each month. 
2. “Member of household” shall include 
(a) spouse(s); 
(b) children and their spouses; 
(c) parents. 
(d) servants and dependents.

5. Valuation of Perquisites in respect of Travelling, Touring, Accommodation [Rule 3(7)(ii)]

The basis of valuation is as follows—

Perquisite in respect of travelling, touring, accommodation and any other expenses paid by employer for any holiday availed by employee (or any member of household) other than leave travel concession.

Mode of ValuationWhere such facility is available uniformly to all employeesWhere such facility is not available uniformly to all employees
Step 1 –
Find out cost to the Employer
Expenditure incurred by the EmployerValue at which such facilities are offered by other agencies to the public.
Step-2 :
Less : Amount recovered from the Employee
Recovered from the Employeerecovered from the Employee
Taxable Value of Perquisites
( Step 1 – Step 2)
Balancing amount
(if it is positive).
Balancing amount
(if it is positive).

6. Valuation of Perquisites in respect of Free Food and Non-alcoholic Beverages [Rule 3(7)(iii)]

If any lunch allowance, dinner allowance or refreshment allowance is given to an employee, it is chargeable to tax.

The value of free meals provided by the employer is taxable as follows—

CircumstancesValue of benefit 
(a) Tea or snacks provided during working hoursNil
(b) Free food and non-alcoholic beverages during working hours provided in a:
 
(i) remote area; or 

(ii) an offshore installation.
Nil
(c) Free food and non-alcoholic beverages provided by the employer during working hours:
 
(i) at office or business premises; or 

(ii) through paid vouchers which are not transferable and usable only at eating joints. 
Nil, if the value thereof in either case is upto ₹50 per meal.   
Amount in excess of ₹50 per meal shall be the value of such taxable perquisite 
(d) In any other caseActual amount of expenditure incurred by the employer as reduced by the amount if any paid or recovered from the employee for such benefit or amenity.

7. Valuation of Perquisites in respect of Gift, Voucher or Token [Rule 3(7)(iv)]

Tax Treatment :

(A) Aggregate Value of Gift is upto Rs. 5000 during the previous year :

  • Perquisites Value is NIL

(B) Aggregate Value of Gift is more than Rs. 5000 during the previous year :

  • Perquisites Value is the value in excess of Rs. 5000
Note :
>> Gift in the form of Cash or Convertible into Cash are outside the ambit of this Rule and accordingly Taxable

>> With effect from the Assessment Year 2010-11 onwards, this Perquisites is Taxable in the hands of all Employees due to abolition of Fringe Benefits.

8. Valuation of  Perquisites in respect of Credit Card Facilities [Rule 3(7)(v)]

The perquisite in respect of credit card is taxable as follows—

(A) Used for Personal or Private Purposes :

  • Perquisites Value is equal to Expenses, Membership Fees and Annual Fees incurred by the Employee and Reimbursed / Paid by the Employer.

(B) Used Wholly and exclusively for Official Duties

  • Perquisites Value is NIL

Note : With effect from the Assessment Year 2010-11 onwards, this Perquisites is Taxable in the hands of all Employees due to abolition of Fringe Benefits.

9. Valuation of  Perquisites in respect of Club Expenditure or Membership [Rule 3(7)(vi)]

Employers often extend membership of reputed Clubs to senior Corporate Employees and they can use the same for Private or Official purposes or for Both.

The perquisite in respect of club facility is taxable as follows—

(A) Used for Private Purpose

  • Perquisites value is the expenditure incurred by employer including the amount of annual or periodical Fee

(B) Used for discharged of Official Duties

  • Perquisites Value is NIL

(C) Provision of Health Club, Sports Club, etc. facilities to all employees uniformly

  • Perquisites Value is NIL
Notes:
1. In case the Club facilities are used exclusively for official purposes, details pertaining to date, nature of expenditure and business purpose need to be maintained by the employer.

2. The employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.
With effect from the Assessment Year 2010-11 onwards, this perquisite is taxable in the hands of all employees due to abolition of fringe benefits tax.

10. Perquisites in respect of Use of Employer’s Movable Assets [Rule 3(7)(vii)]

The value of benefit to the employee resulting from the use by the employee or any member of his household of any moveable asset belonging to the employer or hired by him shall be determined as under:

Tax Treatment :

(A) When the Movable Assets is owned by the Employer :

  • Value of Perquisites is 10% per annum of the actual cost of the Asset

(B) When the Movable Asset is Hired by the Employer :

  • Perquisites Value is Rent/Hire Charges Paid / payable by the Employer.
Note :
1. In case the Club facilities are used exclusively for official purposes, details pertaining to date, nature of expenditure and business purpose need to be maintained by the employer.

2. The employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.
With effect from the Assessment Year 2010-11 onwards, this perquisite is taxable in the hands of all employees due to abolition of fringe benefits tax.

11. Valuation of Perquisites in respect of Movable Assets sold by an Employer to its Employees at a Nominal Price [Rule 3(7)(viii)]

The value of benefit to the employee arising from the transfer of any moveable asset belonging to the employer directly or indirectly to the employee or any member of his household shall be determined as under:

Tax Treatment :

(A) If Movable Assets are Computers and Electronic Items :

  • Perquisite Value is the difference between the Actual cost of assets as reduced by 50% (Reducing Balance Method) for each completed year from the period it was put to use and the amount paid by the employee.

(B) If Movable Assets are Motor Cars :

  • Perquisite Value is the difference between the Actual cost of assets as reduced by 20% (Reducing Balance Method) for each completed year from the period it was put to use and the amount paid by the employee.

(C) In case of any Other Movable assets :

  • Perquisite Value is the difference between the Actual cost of assets as reduced by 10% of cost for each completed year from the period it was put to use and the amount paid by the employee.

12. Valuation of  Perquisites in respect of  Any other benefit, amenity, etc. [Rule 3(7)(viii)]

Meaning:

The employer will issue the shares of his company to the employees at a discount price compared to the market price or by free of cost in order to retain the best talent and enhance their commitment to the Company. Such shares have to be issued under Employees Stock Option Scheme (ESOS) or Employees Stock Option Plan of the Company (ESOP).

Tax Treatment:

This perquisite is taxable in the hands of all employees due to abolishing of fringe benefits tax. The perquisite value would be the difference between fair market value of shares to be determined as per the Income Tax Rules as on the date of exercise of option and actual amount paid by the employee. It would be taxed in the Assessment Year relevant to the previous year in which share are allotted! transferred to the employee

13. Valuation of Perquisites of Motor Car if Owned or Hired by the Employer

A. Motor Car is used wholly and exclusively in the performance of Official Duties :

  • When the CC is less than / or more than 1600 CC : –
    • Perquisites Value is NIL

B. Motor Car is used exclusively for Private / Personal Purposes :

  • When the CC is less than / or more than 1600 CC : –
    • Perquisites value is actual Expenditure incurred by the employer on the running and maintenance of Car + Salary of Chauffeur + Normal Wear and Tear ( i.e. 10% p.a. of the Vehicle Cost) or Hire Charges.
    • In case Expenses on Maintenance and running are met by the Employee : Perquisites Value is confined to Salary paid to Chauffeur and normal Wear and Tear ( i.r. 10% p.a. of the Vehicle Cost).
    • If any amount is recovered from employee the same shall be Deducted from the Perquisite Value.

C. Motor Car is Used Partly in the performance of Duties and Partly for Private / Personal Purposes.

1. When CC does not exceed 1600 CC :

  • When Expenses on maintenance and running are met by the Employer ..
    • Perquisites Value is Rs. 1800 p.m. ( plus Rs.900 if Chauffeur is provided)
  • When Expenses on maintenance and running are met by the Employee ..
    • Perquisites Value is Rs. 600 p.m. ( plus Rs.900 if Chauffeur is provided)
    • If any amount is recovered from employee is Not Deductible

2. When CC excees 1600 CC :

  • When Expenses on maintenance and running are met by the Employer ..
    • Perquisites Value is Rs. 2400 p.m. ( plus Rs.900 if Chauffeur is provided)
    • If any amount is recovered from employee is Not Deductible
  • When Expenses on maintenance and running are met by the Employee ..
    • Perquisites Value is Rs. 900 p.m. ( plus Rs.900 if Chauffeur is provided)
    • If any amount is recovered from employee is Not Deductible

14. Valuation of Perquisites of Motor Car if Owned by the Employee

1. When Expenses on maintenance and running are met by the Employee ..

  • Perquisites Value is NIL

2. When Expenses on maintenance and running are Met or Reimbursed by the Employer ..

(A) Motor Car is used wholly and exclusively in the performance of Official Duties :

  • When the CC is less than / or more than 1600 CC : –
    • Perquisites Value is NIL

(B) Motor Car is used Partly in the performance of Official Duties and Partly for Private / Personal purposes :

  • When the CC of Motor Car does not exceed 1600 CC :-
    • Perquisites value is Actual Expenditure incurred by the Employer as Reduced by the amount of Rs. 1800 p.m. plus (+) Rs.900 p.m. if chauffeur is provided Less amount recovered from the employee.
  • When the CC of Motor Car excees 1600 CC :-
    • Perquisites value is Actual Expenditure incurred by the Employer as Reduced by the amount of Rs. 2400 p.m. plus (+) Rs.900 p.m. if chauffeur is provided Less amount recovered from the employee.

(C) Motor Car is used exclusively for Private Purposes

  • When the CC is less than / or more than 1600 CC : –
    • Perquisites value is Actual Expenditure incurred by the Employer Less amount recovered from the employee.

15. Perquisites in case of Other Conveyance like Scooter, Motor Cycle etc. but not Motor Car

1. When Conveyance is provided and expenses are met by the Employer :

(A) Used exclusively for Official Purposes

  • Perquisites Value is Nil

(B) Used exclusively for Private Purposes

  • Perquisites value is actual amount spent by the employer on running & maintenance and normal wear and tear of the vehicle.

(C) Used partly for Official and partly for Private Purposes

  • Reasonable proportion of expenses on running and maintenance and normal wear and tear attributable to private use.

2. When Conveyance is owned by the employee and expenses are met by the Employer

(A) Used exclusively for Official Purposes

  • Perquisites value is Nil

(B) Used Partly for Official and Partly for Private Purposes

  • Perquisites value is acutal expenditure incurred by the Employer as reduced by Rs.900 p.m. or such higher sum as certified by Employer and reduced by the amount recovered from the employee.

(C) Used exclusively for Private purposes

  • Perquisites value is actual amount spent by the employer

Documentation, a must:—

Specified documentation is required to be maintained when the Conveyance is used either wholly or partly in the performance of the official duties.

  1. The Employer has maintained the records pertaining to the details of journey such as date ofjoumey, destination, mileage, amount of expenditure incurred.
  2. The Employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.
Notes :
1. When the employer recovers any amount from the employee, such amount shall be reduced from the Perquisite value arrived as above except specifically prohibited as stated.

2. When the conveyance is owned by the employee, he can claim inore than the eligible expenditure specified under the respective categories subject to maintenance of Documentation as a proof thereof.

3. When the employer provides two cars to the employee, the perquisite value of one car shall be calculated as if the same has been used exclusively for private purposes.

16. Valuation of Perquisites in respect of Free or Concessional Education Facilities to any member of Employees’ household : [Rule 3(5)]

The Valuation is explained in the following chart :

CircumstancesValue of Benefit
(a) Where the educational institution is itself maintained and owned by the employerThe cost of education in a similar institution in or near the locality.However, if educational facilities are provided to the children of the employee (any other member of the household not covered here), the value of this perquisite shall be NIL… if the cost of such education or the value of benefit per child does not exceed Rs. 1,000 p.m.
(b) Where free education facilities for such members of employees’ household are allowed in any other educational institution by reason of his being in employment of that employerThe cost of education in a similar institution in or near the locality.
However, if educational facilities are provided to the children of the employee (any other member of the household not covered here), the value of this perquisite shall be NIL … [ if the cost of such education or the value of benefit per child does not exceed Rs. 1,000 p.m.]
  1. However, in all the above cases, if any amount is paid or recovered from the employee on this account, the value of benefit computed above shall be reduced by the amount so paid or recovered.
  2. Where cost of education exceeds ₹1,000 p.m. per child, the whole amount shall be taxable in the hands of the employee and no deduction of ₹1,000 p.m. shall be allowed.
1. Payment of fee by the employer directly to educational institution for the education of members of household including children or reimbursement of such fee to the employee shall be taxable in the hands of all employees.

2. Amount incurred by the employer for providing free education facility or training to an employee is not taxable.

17. Valuation of  Perquisites in respect of Sweat Equity Shares or Employees Stock Option Plan (ESOP) [ Section 17(2)(vi) & Rule 3(8) & (9)]

The perquisite in respect of “sweat equity shares” or ESOP is chargeable to tax in the hands of employees, if such shares are allotted or transferred to the concerned employee after March 31, 2009.

What is “sweat equity shares” :

It means shares issued by a company to its employees (including directors, former employees) at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called”. Such shares may be equity shares, any other shares, scrips, debentures, derivatives or units. These may be transferred/allotted directly or indirectly to the employee.

What is ESOP (Employees Stock Option Plan) :

ESOP is an abbreviation which stands for employee stock option plans. Under the ESOP plan, an employee (at his option) can acquire shares in the employer-company at a reduced price after completion of a specified period of service.

In which year it is Chargiable to Tax :

Value of perquisite on the above basis will be taxable in the hands of employee in the previous year in which shares or securities are allotted or transferred to him. It may be noted that fair market value shall be calculated on the date on which the employee exercises the option but perquisite will be taxable in the year in which shares are allotted.

How to find out Taxable Value of Perquisites :

The value of such specified security or sweat equity shares shall be the “Fair Market Value” of the specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from the assessee in respect of such security or shares.

“Fair Market Value”
>> In the case of shares listed in India, the fair market value shall be the average of the opening stock exchange price and closing stock exchange price of the share on the date of exercise of option.

>> Where, however, on the date of exercise of the option, the share is listed on more than one recognized stock exchanges, the fair market value shall be the average of opening price and closing price of the share on the recognised stock exchange which records the highest volume of trading in the share.

>> Where on the date of exercise of the option, there is no trading in the share on any recognized stock exchange in India, the fair market value shall be the closing price of the share on any recognised stock exchange on a date closest to the date of exercise of the option and immediately preceding such date.

>> In the case of unquoted shares, the fair market value shall be determined by a merchant banker.

18. Perquisites Valuation of Medical Facilities [Proviso to Section 17(2)]

(A). Medical Facilities / Reimbursement in INDIA

The provisions are given below—

1. Employer’s hospital/ Government hospital/ approved hospital –

The perquisite in respect of medical facility provided by an employer in the following hospitals/clinic is NOT Chargeable to Tax

  1. hospital owned/maintained by the employer,
  2. hospital of Central Government/State Government/local authority,
  3. private hospital if it is also recommended by the Government for the treatment of Government employees,
  4. specified medical facility (given in rule 3A) in a hospital approved* by the Chief Commissioner.

2. Health insurance premium –

Medical insurance premium paid or reimbursed by the employer is NOT Chargeable to Tax.

3. Any other facility in India –

Any other expenditure incurred or reimbursed by the employer for providing medical facility in India is chargeable to tax (exemption of Rs. 15,000 was available for such reimbursement up to the assessment year 2018-19).

(B). Medical Facilities Outside INDIA

Any expenditure incurred by the employer (or reimbursement of expenditure incurred by the employee) on medical treatment of the employee or any member of the family of such employee outside India, is taxable subject to the conditions given below —

1. Perquisites Not Chargeable to Tax

  • Medical treatment of employee or any member of family of such employee outside india
  • Cost on travel of the employee/any member of his family and one attendant who accompanies the patient in connection with treatment outside India
  • Cost of stay abroad of the employee or any member of the family for medical treatment and cost of stay of one attendant who accompanies the patient in connection with such treatment

Condition to be satisfied

  1. Expenditure shall be excluded from perquisite only to the extent permitted by the Reserve Bank of india
  2. Expenditure shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the expenditure on travelling, does not exceed Rs. 2,00,000
  3. Expenditure shall be excluded from the perquisite only to the extent permitted by the Reserve Bank of India

19. Perquisites Valuation of Leave Travel Concession or Assistance (LTC/LTA) in India. [Section 10(5) & 10(6)(i)]

The employee is entitled to exemption under section 10(5) in respect of the value of travel concession or assistance received by or due to him from his employer or former employer for himself and his family, in connection with his proceeding—

  1. on leave to any place in India.
  2. to any place in India after retirement from service or after the termination of his service.

The exemption shall be allowed subject to the following

Different SituationsAmount of Exemption if journey is performed on or after 1,1997
Where journey is performed by AIRAmount of air economy class fare of the National Carrier by the shortest route; orthe amount spent,whichever is less
Where journey is performed by RAILAmount of air-conditioned first class rail fare by the shortest route; orthe amount spent,whichever is less
Where the places of origin of journey and destination are connected by Rail and journey is performed by any other mode of TransportAmount of air-conditioned first class rail fare by the shortest route; orthe amount spentwhichever is less
Where the places of origin of journey and destination (or part thereof) are not connected by RAIL 
Where a recognised public transport system existsFirst class or deluxe class fare by the shortest route; orthe amount spent,whichever is less.
Where No recognised public transport system existsAir-conditioned first class rail fare by the shortest route (as if the journey had been performed by rail); orthe amount actually spent,whichever is less.

One should also keep in view the following Points— 

1. Meaning of “Family” –

  • For this purpose, “family” includes spouse and children of the employee. It also includes parents, brothers and sisters of the employee, who are wholly or mainly dependent upon the employee.
  • However, family does not include more than two surviving children of an individual born on or after October 1, 1998

2. Only 2 journeys in a Block of 4 years is Exempt –

Exemption on the aforesaid basis is available in respect of 2 journeys performed in a block of four calendar years commencing from 1986.

3.  “Carry-over” Concession –

If an assessee has not availed travel concession or assistance during any of the specified four-year block periods , exemption can be claimed in the first calendar year of the next block (but in respect of only one journey). This is known as “carry over concession”.

4. Exemption is based upon Actual Expenditure –

The quantum of exemption is limited to the actual expenses incurred on the journey. In other words, without performing any journey and incurring expenses thereon, no exemption can be claimed. 

5. Exemption is available in respect of Fare –

The exemption is strictly limited to expenses on air fare, rail fare, bus fare only. No other expenses, like scooter or taxi charges at both ends, porterage expenses during the journey and lodging/boarding expenses will qualify for exemption. 

6. Exemption is available in respect of Shortest Route –

Where the journey is performed by a circuitous route, the exemption is limited to what is admissible by the shortest route. 

7. Fixed allowance is not subject to Exemption –

Fixed sum paid to employees by way of leave travel allowance on basis of self-declaration made by employees would not be exempt under section 10(5)—

8. Family Member Travelling Separately –

Exemption shall not be available if the family members are travelling separately without the employee who is not on leave.

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