Perquisite in Salary
Last updated: 13 July 2026. General explainer, not legal or tax advice.
At a glance
What a perquisite is
A perquisite is a benefit an employer provides on top of salary, usually in kind rather than cash. The Income Tax Act defines perquisites in Section 17(2). Common examples are a company car, rent free or concessional accommodation, an interest free or low interest loan, and stock options. Most perquisites are treated as part of salary and taxed.
How perquisites are valued and taxed
Each type of perquisite is valued under the tax rules, and that value is added to the employee's salary income, so tax and TDS apply to it. The valuation is not always the actual cost. A company car, for instance, is valued using a prescribed monthly figure rather than the real expense, which can be lower than the true benefit.
Perquisite, allowance and reimbursement
These three are easy to blur. An allowance is cash paid with salary, such as house rent allowance. A reimbursement pays back an expense against bills. A perquisite is a benefit in kind. All three can have tax effects, but they are valued and reported in different ways.
Common perquisites for SMEs
For a small company the usual perquisites are a company car or fuel, employer provided accommodation, and subsidised loans. The car and fuel benefit has its own valuation, which is why it often sits on a separate line when pay is structured.
Reporting perquisites and Form 12BA
Perquisites are not only taxed, they are reported. Where an employee has perquisites, the employer issues Form 12BA, a statement of the perquisites and their values, alongside Form 16. This is how the employee and the tax department see what benefit was given and how it was valued.
For an SME the practical point is to value each perquisite by the prescribed method, add it to salary for TDS, and reflect it in the year end statement. Keeping the working, especially for a company car or accommodation, avoids a query later about how a figure was reached.
Worked example
An employer gives a manager a car that is also used privately. Rather than adding the real running cost, the tax rules add a prescribed monthly value to the manager's salary as a perquisite, and that value is taxed along with the rest of the pay.
Related terms
Frequently asked questions
What is a perquisite in salary?
It is a benefit from the employer, usually in kind, given in addition to salary, such as a company car, rent free housing or stock options. Most are taxable under Section 17(2).
Are all perquisites taxable?
Most are, valued under the tax rules and added to salary income. A few are exempt or valued at nil in specific cases, so the treatment depends on the benefit.
How is a perquisite different from an allowance?
An allowance is cash paid with salary. A perquisite is usually a benefit in kind. Both can be taxable but are valued and reported differently.
Under which section are perquisites defined?
Section 17(2) of the Income Tax Act defines perquisites and how they are treated as part of salary.
Is a perquisite valued at its actual cost?
Not always. Several perquisites, such as a company car, are valued using a prescribed figure rather than the real expense.
What is Form 12BA?
A statement of the perquisites provided to an employee and their values, issued by the employer along with Form 16 where perquisites apply.
How are perquisites reflected for TDS?
Each perquisite is valued by the prescribed method and added to salary, so tax is deducted on the benefit through the year, not just on cash pay.
Sources and official references
The rules and figures on this page trace to the official sources below. Statutory amounts and dates change, so confirm the current number on the source before you act on it.
How Offrd helps
Offrd structures salary and its components clearly, so cash pay and benefits are laid out where your accountant can value them.