Perks are non-monetary benefits given to the employees in addition to wages, salaries, and health \/ retirement benefits. Different from wages, salaries, and benefits, it is often considered extras that are nice to have. That said, it can reduce employee turnover and attract top talent to your organization.<\/p>\n
Taxable perks: Some benefits provided by employers are taxable. These include rent-free accommodation, utilities (gas, electricity, and water), income tax withholding from employees\u2019 salaries, reimbursement of medical expenses, and wages paid to household help.<\/p>\n
Tax-exempted perks: Employers may offer various non-taxable fringe benefits to employees, including travel allowances and contributions to PF. Other common examples include medical aid, sports clubs, health clubs, and refreshments during office hours.<\/p>\n
Miscellaneous perks for certain employees: Some of the employers may benefit perquisites on a concessional rate, education funded by the company, or a car owned by the company but used by the employee. This may apply only to higher authority or top-ranked executives of the company.<\/p>\n
Perquisites and allowances are two kinds of additional compensation given to the employees by the company. Though employees benefit from them, they differ in their nature and purpose.<\/p>\n
Perquisites are perks that an employee benefits or enjoys free of cost beyond their fixed salary or wages. It is non-taxable, non-monetary, and does not impact the take-home salary. As a part of the total remuneration package, it helps to attract and retain top talent.<\/p>\n
On the contrary, allowances are usually monetary and taxable given to the employee apart from their salary. They are generally paid in cash to cover the employees\u2019 expenses. It increases their take-home salary and is given at regular intervals whenever needed.<\/p>\n
Offering perquisites to employees can be a great way to motivate them, which will help your business to stay productive. Furthermore, it can attract top talent in the form of recruits.<\/p>\n
Let\u2019s assume an employee\u2019s income under \u201csalaries\u201d is INR 10,00,000 and inclusive of non-monetary perquisites is INR 1,00,000.<\/p>\n
According to the new tax regime of FY 23-24, Tax on salary inclusive of education and health cess @ 4%: INR 78,000<\/p>\n
So, the average tax rate can be calculated as: (78,000 \/ 10,00,000) x 100% = 7.8%<\/p>\n
Tax paid on non-monetary perquisites = 7.8% x 1,00,000<\/p>\n
= INR 7,800<\/p>\n
The amount of tax deposited every month by the employer = 7,800 \/ 12 = INR 650<\/p>\n
Therefore, the employer will have to pay INR 650 as TDS (Tax Deducted at Source) on the employee\u2019s salary.<\/p>\n
Salary perks, also known as perquisites, are the fringe benefits an employee receives apart from the regular salary or wages. These non-monetary which include medical aid, rent-free accommodation, and providing office utilities to promote a positive work culture in the organization.<\/p>\n
According to the Income Tax Act, some perquisites are taxable in certain cases. These include medical insurance, stock options, travel allowances and much more. The calculation of taxes on perquisites may vary depending on the type of benefits, the employee\u2019s salary level, and specific tax laws.<\/p>\n
Employers are responsible for calculating taxes by applying relevant income tax rates to the employee\u2019s income. These taxes are carried out for withholding purposes and reported on the employee\u2019s Form W-2 document to keep track of their tax returns.<\/p>\n","protected":false},"featured_media":0,"template":"","class_list":["post-5160","hr-glossary","type-hr-glossary","status-publish","hentry"],"acf":[],"yoast_head":"\n