Perquisite
A non-cash benefit or facility an employer provides to an employee, such as rent-free accommodation or a company car, taxed as part of salary based on a specified valuation method.
In short
- Common perquisites include rent-free accommodation, a company car, interest-free loans, ESOPs, and employer-paid gifts, each valued by its own specific formula.
- Perquisite value is added to gross salary and taxed the same way under both the old and new tax regime.
- A company car used for mixed personal and official use is valued at a flat monthly rate, not the car's actual cost.
- ESOPs are taxed twice: as a perquisite when the option is exercised, and as a capital gain when the shares are eventually sold.
A perquisite is any benefit or facility, beyond cash salary, that an employer provides to an employee because of their employment: rent-free or concessional accommodation, a company car available for personal use, interest-free or concessional loans, employer-paid club memberships, and several others. Most perquisites are taxable, valued using specific rules prescribed under the Income Tax Rules for each category rather than simply the employer's actual cost.
Some perquisites are wholly or partly exempt, such as specified medical benefits or reimbursements within prescribed limits. Because perquisite valuation rules are detailed and category-specific, they're a common source of confusion in salary structuring, and getting the valuation wrong understates taxable salary in a way that can surface later as a mismatch. Current FY 2026-27 valuation figures for the car, accommodation, loan, and ESOP categories are in our guide to perquisites under income tax.
Also referred to as: perquisites, perks, fringe benefits.
Frequently asked questions
Are all perquisites taxable?
Most are, but several carry exemptions within limits, small loans, gifts up to a threshold, and specified medical benefits among them. Above those limits, the full value typically becomes taxable.
Does the new tax regime make perquisites tax-free?
No. Perquisite valuation is the same under both regimes since it's part of computing gross salary itself. The regime choice affects other deductions and exemptions, not perquisite valuation.
Who values perquisites, the employer or the employee?
The employer, as part of preparing Form 12BA and deducting TDS on salary. The values follow fixed formulas under the Income Tax Rules rather than employer discretion.
Disclaimer
This glossary entry is for general informational purposes only and does not constitute professional tax, legal, or financial advice. Rules and rates change, so consult a qualified Chartered Accountant for advice specific to your situation.