Salary Perquisites Tax Treatment India FY 2026-27: Rent-Free Accommodation, Company Car, ESOPs
In short: Beyond salary and bonus, your employer may provide non-cash benefits – rent-free flat, company car, club membership, mobile phone, free meals, ESOPs, interest-free loans, education subsidy – all of which are perquisites under Section 17(2) and add to your taxable salary. The IT Department prescribes specific valuation rules (Rule 3) for each perk. Some perks are tax-free under specific caps (free meals up to Rs 50, gifts up to Rs 5,000, laptop for official use). Others are valued based on company cost (club, accommodation). Most major perks (cars, accommodation, ESOPs) are taxed in the year they are provided/exercised. The new tax regime allows employer NPS contribution exemption but otherwise treats perks the same.
What Counts as a Perquisite
Section 17(2) defines perquisites broadly: any benefit, amenity, or advantage provided by an employer to an employee, in cash or in kind, above the regular salary. The taxable value is added to your “Salary” income and shown in Form 16 + Form 12BA (perquisite breakdown).
Rent-Free / Concessional Accommodation
If your employer provides housing free of cost or below market rent, the value is added as a perquisite. From FY 2024-25 (CBDT notification August 2023), simplified valuation:
If accommodation is owned by employer:
10 percent of salary – if population of city is above 40 lakh (Delhi NCR, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata)
7.5 percent – if population 15-40 lakh
5 percent – if population below 15 lakh
If accommodation is rented by employer: Lower of (15 percent of salary) or (actual rent paid by employer).
If furnished: Add 10 percent of cost of furniture per year (or actual rent of furniture).
Less: any rent paid by employee.
Example: Salary Rs 30 lakh, accommodation in Bengaluru. Perquisite = 10 percent of 30L = Rs 3 lakh. Taxable at slab.
Company Car
The valuation depends on car ownership and use:
Car owned by employer, used both official and personal:
Petrol/diesel up to 1.6 litre cubic capacity: Rs 1,800 per month
Petrol/diesel above 1.6 litre: Rs 2,400 per month
Plus driver provided: Rs 900 per month additional
Car owned by employee, employer reimburses fuel/maintenance:
Same monthly amounts deemed as official expense (deducted from reimbursement). Excess reimbursement is perquisite.
Car owned by employer, used entirely personal: Full operating cost (fuel + maintenance + driver salary) added as perquisite.
Club Membership
If employer pays your club fees (corporate club, gym, golf, etc.), the actual amount paid is a perquisite. Exception: clubs where membership is part of official duty (industry associations).
Interest-Free or Concessional Loans
If your employer gives you a loan at zero or below-market interest, the difference between SBI lending rate (for similar loan type) and actual interest charged is a perquisite.
Example: Employer gives Rs 5 lakh interest-free housing loan. SBI home loan rate: 9 percent. Perquisite = 9 percent x Rs 5 lakh = Rs 45,000 annually.
Exception: loans up to Rs 20,000 in aggregate, or for medical treatment of specified illnesses, are exempt.
ESOPs and RSUs
Stock options/RSUs are taxed in two stages:
Stage 1 – At exercise/vest: Perquisite = Fair Market Value at exercise – Exercise price you paid (zero for RSU). Added to salary, taxed at slab. Employer deducts TDS.
Stage 2 – At sale: Capital gain = Sale price – FMV at exercise. Treated as capital gain (STCG/LTCG depending on holding period from exercise).
See our ESOP/RSU detailed taxation guide for full mechanics.
Free or Subsidised Meals
Free meals at office: tax-free up to Rs 50 per meal, max 2 meals/day. Above Rs 50/meal, excess is perquisite. Tea/coffee/snacks during work: exempt regardless of cost.
Meal vouchers (Sodexo etc): same Rs 50/meal cap. Bigger denominations above this become perquisite.
Gifts from Employer
Gifts in cash or kind from employer up to Rs 5,000 in aggregate per year are tax-free. Above Rs 5,000, entire value is perquisite (not just the excess).
Education Concessions
School fee subsidy for employee's children (in company-run school or scholarship): up to Rs 1,000 per month per child is exempt. Above this, the excess is perquisite.
Mobile Phone and Laptop
Mobile phone or laptop provided for official use: fully exempt (no perquisite even if used personally to some extent). This is one of the cleanest perks – no valuation, no cap.
Free Mediclaim
Employer-paid health insurance for self and family: tax-free if it covers reasonable amounts. Cashless treatment via hospital tied up with employer: exempt as well.
Tax-Free Perquisites
Some perks are completely tax-free:
Laptop/computer/mobile for official use – exempt regardless of personal use
Refreshments during office hours – exempt
Free meals up to Rs 50/meal
Gifts up to Rs 5,000/year
Recreation facility (in-house gym, sports) – exempt for employees
Insurance premium under specified scheme for own employees
Education/scholarship within Rs 1,000/month/child limit
Reporting in Form 12BA
Your employer issues Form 12BA annually along with Form 16. It breaks down each perquisite separately:
Rent-free accommodation: Rs X
Concessional car: Rs Y
ESOPs exercised: Rs Z
Other: Rs W
Total perks: Rs X+Y+Z+W (added to your taxable salary in Form 16).
Worked Example
Senior executive: Basic Rs 24 lakh. Lives in employer-owned flat in Mumbai. Has petrol car (1.4L) with company driver. Employer pays club membership Rs 30,000/year. ESOPs exercised in FY 2026-27: Rs 8 lakh (FMV – exercise price).
Accommodation perk: 10 percent of Rs 24L = Rs 2,40,000
Car perk: Rs 1,800/month x 12 = Rs 21,600. Plus driver Rs 900/month x 12 = Rs 10,800. Total: Rs 32,400
Club: Rs 30,000
ESOPs: Rs 8,00,000
Total perquisites: Rs 11,02,400
Total taxable salary: Rs 24,00,000 + Rs 11,02,400 = Rs 35,02,400 (before standard deduction).
FAQs
Can I refuse a perquisite to save tax?
Yes – negotiate with HR to take that portion as cash CTC instead. Cash is taxed too but you have flexibility on how to deploy it (you might prefer your own car/insurance choice).
Are perquisites taxable in new regime?
Yes – new regime taxes perquisites same as old. Only some specific exemptions differ.
Is reimbursement of mobile bill a perquisite?
If for official use only, exempt. If for personal/mixed use without separation, the personal portion may be perquisite. Best to keep separate records.
Are gym/fitness reimbursements taxable?
Generally yes – unless the gym is in-house at the office (recreation facility exemption). Reimbursement of external gym is perquisite.
What about employer's NPS contribution?
Employer contribution to NPS up to 10 percent of salary (basic+DA) under Section 80CCD(2) is exempt and not a perquisite. Available under both regimes.
Sources
- Income Tax Act, Section 17(2)
- Income Tax Rule 3 – perquisite valuation
- CBDT Notification 65/2023 dated 18 August 2023 (accommodation valuation update)
- Section 80CCD(2) – employer NPS contribution
