Section 17 of ITA, 1961 : Section 17: Salary, Perquisite And Profits In Lieu Of Salary Defined

Explanation using Example

Example Scenario:

Raj is an employee at a software company in Mumbai. His employer provides him with the following benefits:

• A salary of ₹1,00,000 per month.
• Rent-free accommodation in a company-owned apartment, which would typically rent for ₹30,000 per month.
• A company car for personal and official use.
• An annual bonus of ₹2,00,000.
• Contribution to a pension scheme under section 80CCD exceeding ₹1,00,000.

Under Section 17 of the Income-tax Act, 1961, the following will be considered for Raj's taxation:

• His salary and annual bonus are included as part of his income.
• The rent-free accommodation is a perquisite, and its value will be added to his income based on the specified rate for cities with a population exceeding 25 lakhs.
• The use of a company car is also a perquisite; however, if it's used for commuting between home and office, it might not be considered a taxable perquisite.
• The excess contribution to the pension scheme over ₹1,00,000 is taxable.

Raj's employer will need to calculate the value of these perquisites and include them in Raj's taxable salary while deducting tax at source.