What does mean by perquisites in Income Tax?
Perquisites are the extra benefits that an employee is given when he occupies a certain post in a company in addition to the salaries. These may be in cash or in kind. If perquisites are provided for the fulfillment of official duty, then the amount is not taxed but if it is provided for personal use, then the amount is taxable. Sometimes certain facilities are provided partly for personal use and partly for official purpose, in that case the value of the personal usage is found and tax is imposed.
For example, an employee may be provided car for personal use as well as for official use. Then only the amount of personal use will be taxed. Any reimbursement, for example, for expenses incurred on office stationery is not taxable.
If the perquisite is paid to a person who does not form an employer-employee relationship with the person making the payment, then its value will not be added to the salary, but it will be taxed under the heading income from other sources. For example, the tip given to a worker by a guest in a household.
Any unauthorized and illegal advantage would not be considered a perquisite. For example, if an employee has been given a flat as accommodation, but when he retires, he does not vacate the house. Instead, he occupies it illegally for 2 years after which he is forcefully vacated. This will not amount to a perquisite but will be considered income from other sources. It will not be considered a benefit.
In another situation, if an employee does not avail of a given perquisite, then its value cannot be assessed for taxation. Since the employer-employee relationship does not exist in case of this employee it should be considered as income from other sources and not as perquisite to the employee. In certain cases, employees do not avail of the perquisites allowed to them. In such cases, the perquisites cannot be considered while assessing the salary of the employee as they do not arise at all.