Tax exemption on Employee benefits* provided by Employer

Medical Insurance Premium paid by employer on your behalf

In case your employer is providing you benefit in regard to paying your medical premium on your behalf & the premium amount is getting deducted from your salary, the payment by employer in any mode other than cash should satisfy the requirements of Section 80D since the employer is effectively acting on behalf of the employee.

Payment of premium by the employer is eligible for tax rebate under Section 80D since it is a payment on behalf of the employee which forms a part of employee’s compensation structure and taxable income.

Transport allowance provided by employer

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. Rs.19,200 can be paid by employer during the financial year, as part of your salary structure that is totally exempt from tax.

Please note that this allowance is tax exempt only up to Rs.19,200 per annum & when the employee makes his own arrangement for travelling to office from his place of residence & does not avail the cab facility, if any provided by the employer.

In case where the transport allowance provided by your employer exceeds Rs.19,200 p.a., then the difference amount would become taxable as salary income.

Cab Facility transport provided by employer

Cab facility given by the employer for to & fro from employee residence to office is not a perquisite in the hands of the employee & a tax exempt.

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 & non-alcoholic beverages provided by employer during working hours at office or business premises or through paid vouchers which are not transferable & usable at only eating joints limited to Rs. 50 per meal each day are exempt from tax in the hands of employee & is tax free perquisite.

For example, meal coupons/ free meals provided by employer could be exempt up to Rs.12,000 in the financial year (in case of a normal 20 working days a month). Please note that free meal coupons up to Rs.50 per meal has been limited for each day.

Health Club facility provided by the employer

Where the health club facility is provided by the employer uniformly to all the employees, the perquisite is tax exempt in the hands of employee. However, its has been separately clarified by CBDT, that for claiming such exemption, health club facility should either be owned or arranged by the employer.

Gifts/ Voucher received from employer

Gifts made in cash or kind by the employer is exempt up to Rs 5,000 in aggregate during the financial year. Gifts may be received by the employee or by a member of the employee’s family.

Please keep in mind, that in case you receive gifts like tablets/ smart-phones/ shopping vouchers/ 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 & will form part of the salary income.

Hence, seeing the number of benefits that can be availed by employee to bring down its taxable salary structure, it is pertinent for the employees to sit with their employer & make them aware of these tax free perquisites for efficient salary structure.

*As per Rule 3(7) of Income Tax Rules, 1962- Valuation of Perquisites

2 Responses to Tax exemption on Employee benefits* provided by Employer

  1. Pravin Kumar December 28, 2016 at 1:23 pm #

    As per my teacher, Medical insurance premium either paid or reimbursed by employer is not chargeable to tax.Also there is no ceiling limit.

    Kindly rectify me if required.