Perquisites: How Company Cars, Housing and Loans Are Valued for Tax

Company car

Where the employer provides a car used partly for official and partly for personal purposes, the perquisite is a fixed monthly amount: one thousand eight hundred rupees for engines up to 1.6 litres and two thousand four hundred above, plus nine hundred rupees if a driver is provided.

These figures are unchanged for many years and bear no relation to the actual cost. A car costing the employer forty thousand rupees a month produces a perquisite of around three thousand three hundred, which is why company cars remain a tax-efficient benefit.

Rent-free accommodation

For non-government employees in owned accommodation, the value is a percentage of salary that varies with the population of the city — ten per cent, 7.5 per cent or five per cent under the revised 2023 rules. Where the accommodation is leased, the lower of actual rent and ten per cent of salary applies.

Any rent recovered from the employee reduces the perquisite. Furniture adds ten per cent of its cost, or the actual hire charges.

Loans and other benefits

Interest-free or concessional loans are valued using the State Bank of India rate on the first day of the year, applied to the maximum monthly outstanding balance. Loans up to twenty thousand rupees in aggregate, and loans for specified medical treatment, are exempt.

Free meals during working hours up to fifty rupees per meal, gifts in kind up to five thousand rupees a year, and telephone and internet reimbursements are exempt within their limits.

ESOPs

Employee stock options are taxed twice: as a perquisite on exercise, on the difference between fair market value and exercise price, and as capital gains on eventual sale, on the difference between sale price and the value already taxed.

Eligible start-ups may defer the TDS on the perquisite, under Section 192(1C), for up to five years or until sale or cessation of employment, whichever is earliest.

Frequently asked questions

### How is a company car taxed?

At prescribed monthly rates rather than actual cost: one thousand eight hundred rupees for engines up to 1.6 litres, two thousand four hundred above, plus nine hundred for a driver. These apply where the car is used for both official and personal purposes.

### Are ESOPs taxed when granted?

No. The perquisite arises on exercise, computed as fair market value less exercise price, and capital gains arise on sale. Eligible start-ups may defer the TDS on the exercise perquisite under Section 192(1C).

### Is an interest-free loan from my employer taxable?

Yes, valued at the SBI rate on the first day of the year applied to the maximum monthly outstanding balance. Loans not exceeding twenty thousand rupees in aggregate, and loans for specified medical treatment, are exempt.