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TMI Blog‘Perquisites’ as per section 17 as it is and as it will be after amendments proposed.- Complications, litigation are discussed to highlight need to simplify provisions for the head ‘salaries’ which should be simple and easy to understand and implement.X X X X Extracts X X X X X X X X Extracts X X X X ..... ‘Perquisites’ as per section 17 as it is and as it will be after amendments proposed.- Complications, litigation are discussed to highlight need to simplify provisions for the head ‘salaries’ which should be simple and easy to understand and implement. X X X X Extracts X X X X X X X X Extracts X X X X ..... ts also include some cases related to employers about tax deduction at source where in the report section 17 is also mentioned. Section 192 is about TDS from salaries we find litigation on this section as follows: In this search we find cases about TDS from salaries. Issues are on aspects of taxability of salary and perquisites, deductions and exemptions allowable to employees etc. Results found are as follows: all/ any courts 413 records, Supreme Court 10 records Supreme Court orders / high lights ( this is about SLP) 7 records ITAT 256 records It is in spite of facts that many cases are not contested fully and assesses give up after the first appellate stage or second appeal stage. Many cases are not contested by revenue also due to low tax effect in comparison to minimum tax effect prescribed for filing appeal, from time to time. Cases up to stage of first appeal are not reported. And all cases are not reported on this website. Complexities and some related provisions: At present under the salaries head we have three section namely sections 15-17 in part A of Chapter IV. These provisions were amended from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. For example, we find 41-foot notes about amendments in S.17, alone and it also includes some amendments with retrospective effect. Likewise we find several amendments in S.15 and 16. Part B consisting of sections 18 -21 were earlier omitted by the Finance Act, 1988, w.e.f. 1-4-1989 . Before that these provisions were also amended from time to time. Besides head salaries, other Chapters and sections of the Act are also relevant for computation and determination of taxable income. These includes exemptions and deductions from income in the Act and Income tax Rules about computations of deductions, exemptions, and taxable amounts etc. Therefore, as a whole, even computation of income under the head 'salaries' is not a simple task. Vide clause 9 of the Finance Bill, 2025 the following amendments are proposed. Amendment of section 17. 9. In section 17 of the Income-tax Act, in clause (2), with effect from the 1st April, 2026,-- (a) in sub-clause (iii), in paragraph (c), for the words "fifty thousand rupees", the words "such amount as may be prescribed" shall be substituted; (b) in the proviso occurring after sub-clause (viii), in clause (vi), in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e long line, in clause (B), for the words "two lakh rupees", the words "such amount as may be prescribed" shall be substituted." Unquote: Therefore, after the Finance Bill is passed and assented by the President of India, the provisions to prescribe amounts by way of notifications to amend Income tax Rules, 1962 shall be required. After amendment, section 17 shall read as follows (analysis added): For a review and recap of the subject, and a rethink, the section is reproduced below with highlights added by underlining of related provisions, important and catch words. Amendment is marked in red colour and existing words are marked in green colour. Some other observations are added: Section 17 Salary, perquisite and profits in lieu of salary defined Income-tax Act, 1961 "Salary", "perquisite" and "profits in lieu of salary" defined. 17. For the purposes of sections 15 and 16 and of this section,- (1) "salary" includes- (i) wages; (ii) any annuity or pension; (iii) any gratuity; (iv) any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages; (v) any advance of salary; 1[(va) any payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by an employee in respect of any period of leave not availed of by him;] (vi) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule; (vii) the aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof; and (viii) the contribution made by the Central Government or any other employer] in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD;] (ix) the contribution made by the Central Government in the previous year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 80CCH;] (2) "perquisite" includes- (i) the value of rent-free accommodation provided to the assessee by his employer 40[computed in such manner as may be prescribed]; 41[(ii) the value of any accommodation provided to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by his employer at a concessional rate. Explanation.-For the purposes of this sub-clause, it is clarified that accommodation shall be deemed to have been provided at a concessional rate, if the value of accommodation computed in such manner as may be prescribed, exceeds the rent recoverable from, or payable by, the assessee;] (iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases- (a) by a company to an employee who is a director thereof; (b) by a company to an employee being a person who has a substantial interest in the company; (c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income 7[under the head "Salaries" (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds fifty thousand rupees / such amount as may be prescribed:] [Explanation.-For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause;] (iiia)13[***] (iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee; (v) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund 14[or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952)], to effect an assurance on the life of the assessee or to effect a contract for an [annuity] [(vi) the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee. Explanation.- For the purposes of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-clause,- (a) "specified security" means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees' stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme; (b) "sweat equity shares" means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called; (c) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares; (d) "fair market value" means the value determined in accordance with the method as may be prescribed; (e) "option" means a right but not an obligation granted to any employee to apply for the specified security or sweat equity shares at a predetermin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed price; 37[(vii) the amount or the aggregate of amounts of any contribution made to the account of the assessee by the employer-- (a) in a recognised provident fund; (b) in the scheme referred to in sub-section (1) of section 80CCD; and (c) in an approved superannuation fund, to the extent it exceeds seven lakh and fifty thousand rupees in a previous year; (viia) the annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme referred to in sub-clause (vii) to the extent it relates to the contribution referred to in the said sub-clause which is included in total income under the said sub-clause in any previous year computed in such manner as may be prescribed; and] (viii) the value of any other fringe benefit or amenity as may be prescribed:] 16[Provided that nothing in this clause shall apply to,- (i) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer; 17[(ii) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treatment of any member of his family- (a) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees; (b) in respect of the prescribed diseases or ailments, in any hospital approved by the 34[Principal Chief Commissioner or Chief Commissioner] having regard to the prescribed guidelines : 38[(c) in respect of any illness relating to COVID-19 subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf:] Provided that, in a case falling in sub-clause (b), the employee shall attach with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital;] (iii) any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government 18[or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),] for the purposes of clause (ib) of sub-section (1) of section 36; (iv) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government 19[or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),] for the purposes of section 80D; 36[***] (vi) any expenditure incurred by the employer on- (1) medical treatment of the employee, or any member of the family of such employee, outside India; (2) travel 21[and] stay abroad of the employee or any member of the family of such employee for medical treatment; (3) travel and stay abroad of one attendant who accompanies the patient in connection with such treatment, 22[subject to the condition that- (A) the expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of India; and (B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees / such amount as may be prescribed;] (vii) any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause : 23[Provided further that for the assessment year beginning on the 1st day of April, 2002, nothing contained in this clause shall apply to any employee whose income under the head "Salaries" (whether due from, or paid or allowed by, one or more employers) exclusive of the value of all perquisites not provided for by way of monetary payment, does not exceed one lakh rupees.] Explanation.-For the purposes of clause (2),- (i) "hospital" includes a dispensary or a clinic 24[or a nursing home]; (ii) "family", in relation to an individual, shall have the same meaning as in clause (5) of section 10; and (iii) "gross total income" shall have the same meaning as in clause (5) of section 80B;] 25[* * *] (3) "profits in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lieu of salary" includes- (i) the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto; (ii) any payment (other than any payment referred to in clause (10) 26[, clause (10A)] 27[, clause (10B)], clause (11), 28[clause (12) 29[, clause (13)] or clause (13A)] of section 10), due to or received by an assessee from an employer or a former employer or from a provident or other fund 30[* * *], to the extent to which it does not consist of contributions by the assessee or 31[interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation.-For the purposes of this sub-clause, the expression "Keyman insurance policy" shall have the meaning assigned to it in clause (10D) of section 10;] 32[(iii) any amount due to or received, whether in lump sum or otherwise, by any assessee from any person- (A) before his joining any employment with that person; or (B) after cessation of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s employment with that person.] Observations: We find that three terms namely "Salary", "perquisite" and "profits in lieu of salary" are defined in inclusive manner and not in exhaustive manner. These are therefore, not exact meanings but can be described as illustrations. Again in various terms used within these definitions other terms are also used in inclusive and indicative manner. Explanatory notes on amendment of section 17 vide Finance Bill, 2025 Clause 9 of the Bill seeks to amend section 17 of the Income-tax Act relating to "salary", "perquisite" and "profits in lieu of salary" defined. The existing provisions of clause (2) of section 17, inter alia, provide that for the purposes of section 15 and section 16 of the Income-tax Act, "perquisite" includes the value of any benefit or amenity granted or provided free of cost or at concessional rate by any employer (including a company) to an employee who is not a director of the company or has a substantial interest in the company, and whose income under the head "Salaries", whether due from, or paid or allowed by, one or more employers, other than the value of all non-monetary benefits or amenities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , exceeds fifty thousand rupees. Further, the Proviso to the said clause provides that any expenditure incurred by the employer on medical treatment of an employee or any member of the family of such employee, outside India, travel and stay abroad of the employee or any member of the family of such employee for medical treatment, or travel and stay abroad of one attendant who accompanies the patient, shall not be included in "perquisite", subject to the condition, among others, that the expenditure on travel shall be excluded only in the case of an employee whose gross total income, as computed before including the said expenditure, does not exceed two lakh rupees. It is proposed to amend the provisions of the said section so as to provide that "perquisite" includes the value of any benefit or amenity granted or provided free of cost or at concessional rate by any employer, including a company to an employee who is not a director of the company or has a substantial interest in the company, and whose income under the head "Salaries", whether due from, or paid or allowed by, one or more employers, other than the value of all non-monetary benefits or amenities, exceeds such amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as may be provided by rules.
It is further proposed to provide that the expenditure on travel incurred by the employer on medical treatment of an employee shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including the said expenditure, does not exceed such amount as may be provided by rules.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the assessment year 2026-2027 and subsequent assessment years. Observations:
We find that for simple amendment lengthy explanatory notes have been provided. This shows the complexity and attempt to make clarifications. X X X X Extracts X X X X X X X X Extracts X X X X
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