Employee benefits* – or perquisites – have become a staple at most organizations the world over. A perquisite is a non-wage benefit provided to the employees in addition to their salary income. Ranging from car loans to free lunch to free gym membership for all employees, employee benefits play an important role in shaping workplace culture and keeping the morale high.
But did you know that many employee benefits also qualify for tax exemption under India’s IT laws? Here are 6 perks that can help you save tax:
Medical Insurance Premium Paid by Employer on your Behalf
If your employer pays your medical premium on your behalf and the premium amount is deducted from your salary, the payment by employer in any mode other than cash will satisfy the requirements of Section 80D, making the payments eligible for tax rebate under Section 80D.
Transport allowance is paid to an employee for the purpose of commuting between the place of residence and the place of office, which is part of the compensation structure. A maximum of Rs.19,200 paid by the employer as transport allowance can be exempted from taxable income.
Note that this allowance is tax-free only if the employee makes his own arrangement for travelling to office from his place of residence and does not take a company cab.
If the transport allowance provided by your employer exceeds Rs.19,200 a year, the difference is taxable as salary income.
Cab Facility Provided by Employer
As per the Indian Income Tax Act, use of any vehicle provided by a company or an employer for journey by the employee from his residence to his office or other place of work, shall not be regarded as a taxable perquisite, even if provided to him free of cost or at concessional rate.
Free Meals Provided by the Employer
Free food and non-alcoholic beverages provided by the employer during working hours at the office or business premises or with non-transferable paid vouchers limited to Rs.50 per meal each day are exempt from tax in the hands of the employee.
Up to Rs.12,000 in meal coupons/free meals provided by the employer can be exempt from tax in any financial year (assuming 20 working days a month).
Health Club Facility Provided by the Employer
Where health club facilities are provided by the employer to all employees, the perquisite is tax-exempt in the hands of the employee. However, CBDT has clarified that for claiming such exemption, the health club facility should either be owned or arranged by the employer.
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Gifts/ Vouchers Received from the Employer
Up to Rs. 5,000 in gifts made in cash or kind can be exempt in any given financial year. Gifts may be received by the employee or by a member of the employee’s family.
Bear in mind that if you receive gifts like tablets/ smart-phones/ shopping vouchers, or any other gift in kind or cash exceeding Rs.5,000 during the year, it would become taxable as a benefit in the hands of employee and will form part of the salary income.
Given the wide variety of employee benefits on offer that qualify for tax exemption, it’s important that you spend time with your employer to figure out an efficient salary structure with perks that help you maximize tax savings.
*As per Rule 3(7) of Income Tax Rules, 1962- Valuation of Perquisites
(The author is CEO & Founder, ClearTax.com)