Perks like free accomodation, electricity charges, etc. not taxed
Sanjay Murarka
(Querist) 23 December 2012
This query is : Resolved
There is a company ABC which has employees on its payroll.
This company, through cross-holdings and other other means, is related to company XYZ.
1)The company XYZ gives free accommodation, bears society maintenance charges and electricity charges for the employees of company ABC.
2)Since ABC is not directly providing the perks, the employees are in fact enjoying them tax-free as the perks are not even reflecting in the Salary Certificates of the employees.
3)If perks are offered in such indirect manner, are they allowed tax-free?
4)If these perks are taxable, who is responsible to deduct/pay the taxes on the perks, the company ABC or the employees enjoying the perks?
5)Or, is this a normal practice of Indian companies?
V R SHROFF
(Expert) 23 December 2012
Someone is re-imbursing part of employee's expenses towards housing .
If it is in limit of 10%, of Salary of Employee, who is residing himself in that home, and working , it amount to providing housing facility to employee.
It may not attract any I Tax.
Directors are availing fully furnished Flats with all [gas, electricity, mtn , car c drv, servant] facility free of cost, ans does not attract tax.
So these Employee need not worry for Tax.
Sanjay Murarka
(Querist) 23 December 2012
Sir, if the parent company ABC(not the related company XYZ) directly gives free accommodation to the employees, than 10% of the salary is added to the salary of the employee and taxed as perquisite. So, I understand, that there is a difference in directly providing accommodation to the employee and indirectly providing the same accommodation through a related company. Only if the company ABC directly provides the accommodation to its employees, then the value of the housing will be reflected in the Salary Certificate and subject to tax.In this case, housing perk will be 10% 0f the salary of the employee. Is this correct? Kindly advise.
RAJU O.F.,
(Expert) 23 December 2012
When the employees of ABC company are enjoying free accomodation and other perks, from another company magnanimously, why do you insist to pay tax. Let them enjoy. We may worry only if such claims are made by authorities
Sanjay Murarka
(Querist) 23 December 2012
Thank you, Sirs. But is there no set regulation regarding taxability of such perks availed by a few employees of ABC company while other employees are denied this tax-free perk? Is it not unfair that such an important issue is left to the discretion or whims of the employer?
My other query was:"Only if the company ABC directly provides the accommodation to its employees, then the value of the housing will be reflected in the Salary Certificate and subject to tax.In this case, housing perk will be 10% of the salary of the employee. Is this correct?"
Respected Sirs, kindly clarify as there appears to be no clear-cut guidelines for an issue which is rampant among family-owned companies and is subject to gross misuse and injustice. Thanks.
Raj Kumar Makkad
(Expert) 01 January 2013
The discretion is not vested with the employer to decide which perks are taxable and which are exempted. Housing perk shall be 10% of the salary in the given case.
Sanjay Murarka
(Querist) 07 January 2013
This goes on:
1)The company does not mention the perquisite value in the Form 16 (Salary Certificate)
2)The employees do not mention the value of this perk in their Income Tax Returns. So, the accommodation is tax-free for the employees.
On whom does the onus lie for payment/deduction of this tax?
V R SHROFF
(Expert) 07 January 2013
Facilities are "NOT INCOME"
what comes in your pocket in form of money is income, and is Taxed, not facilities.
One may use it or not, may drink 1 cups of tea and have 2000/- dinner with friends in name of business expenses , are expenditure and not income of person tasting food.
Can't help as Pvt owned Company is separate entity in eyes of Law.
