Employers often give salary in a combination of cash and non-cash benefits. The non-cash benefits provided by the employer are called perquisites. The extent of perquisites depends on the rank or designation of the employee. Generally, employees working at higher posts get more perquisites.
If the perquisites are intelligently added to the salary structure, it can help you save a lot in taxes. However, there are certain limitations and conditions imposed by the Income Tax Act on the tax benefit that you can get from perquisites. All perquisites may not allow you a tax benefit. So, let’s find out which are the ones that can actually help you to save income tax.
If your company has provided you with a car on a lease, they would deduct the EMI from your salary due to which your taxable salary will be reduced to that extent. However, it is important to note here that an employee is taxed at the perk value of the car and, as per the I-T rules, the perk value allowed for a car up to 1600 cc is Rs 1,800 per month whereas for more than 1600 cc car it is Rs 2,400 per month. You are allowed to use the car for personal or for the company’s work. While leaving the job, the company gives you the option to either buy the car or return it at a depreciated value. Usually, the depreciated value of the car after a few years of usage is very low, so you can get the vehicle at a very low price.
Employees are also allowed to claim repair, maintenance, fuel cost, and other running expenses as reimbursement on the actual basis by producing the bills, subject to the ceiling as prescribed under the I-T Act.
If your employer allows for it, you can get a driver whose salary will be deducted by the company from your salary income reducing your tax liability to that extent. The maximum salary of the driver allowed under this setup is up to Rs 12,000 per month, and the perk value against the driver salary is Rs 900 per month.
If you want to pursue higher studies, it could be very costly if you first get a salary, pay tax on it, and then use the leftover money to pay for the education. If your company sponsors higher studies of its employees, you can take advantage of it. For company-sponsored education, there is a tax of 10% on the total study fees. So, if you fall in the highest tax bracket, it can help you to save up to 20% tax.
A company can give meal coupons up to Rs 2,000 per month to its employees that can be used for payments at restaurants or for buying groceries at eligible stores. Such meal coupons are non-taxable up to a prescribed limit.
Other perquisites such as gift voucher/coupons from a company worth up to Rs 5,000 per annum can be used to reduce the tax liability. Health or recreational club owned or arranged by the company and facility provided to its employees are exempt in the employees’ hands.
If the company offers laptop/ mobile phone/ tablet or any other gadget to its employees, 10% of the value of such devices is considered a perk and included in your salary for tax calculation.
In this way, if you take advantage of your company-provided perquisites, you can significantly reduce the tax outgo.