Perquisites

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 January 2014 Dear Sir,

My query is whether rent paid by company on behalf of employee will be treated as perquisites in the hands of employee u/s. 17(2) (i) and (ii)?

@VaibhavJ

@VaibhavJ (Expert)
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18 January 2014 Hi

Yes it is taxable perq in the hand of an employee.

Thanks

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Querist : Anonymous

Querist : Anonymous (Querist)

20 January 2014 Thanks Vaibhav.
What if company is also paying HRA to employee & Paying Rent to Third party on behalf of his employees? will your answer be same? i need to clarify that company is not owning house, it is paying rent to other party, will sec 17 (2) (i) be applicable for calculating perquisites??

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 Under the Income Tax Act, rent paid by a company on behalf of its employee can indeed be treated as a perquisite in the hands of the employee. Here's a detailed explanation of how this works:

### **1. Rent Paid on Behalf of Employee**

#### **Treatment Under Section 17(2)**
Section 17(2) of the Income Tax Act defines perquisites. Specifically:

- **Section 17(2)(i):** This covers rent-free accommodation provided by the employer in a building owned by the employer. However, this provision doesn't directly apply to your situation since the company does not own the house.

- **Section 17(2)(ii):** This provision deals with any other benefit or amenity provided by the employer. In this case, if the company pays rent on behalf of the employee, it is generally treated as a perquisite under this section.

### **2. Specific Situations**

#### **Rent Payment by Company**

If the company is paying rent to a third party on behalf of the employee:
- **Perquisite Calculation:** The amount of rent paid by the company is treated as a perquisite. This value is included in the taxable income of the employee.
- **Perquisite Value:** The value of the perquisite is the actual amount of rent paid by the company. This amount is added to the employee's income and taxed accordingly.

#### **Company Also Paying HRA**

If the company is paying House Rent Allowance (HRA) to the employee in addition to paying rent to a third party:
- **HRA and Rent Payment:** The employee may claim a deduction under Section 10(13A) for the HRA received, provided they are paying rent and fulfilling other conditions. However, the rent paid by the company on behalf of the employee is still a perquisite and needs to be added to the employee’s income.

### **Summary**

1. **Rent Paid by Company:** Rent paid by the company to a third party on behalf of the employee is treated as a perquisite under Section 17(2)(ii). The amount of rent paid is added to the employee's taxable income.

2. **HRA Payment:** If the company is also paying HRA, the employee can claim HRA exemption based on the actual rent paid and other conditions. However, this does not affect the perquisite treatment of the rent paid directly by the company.

3. **Section 17(2)(i):** This section specifically applies when the employer owns the property. Since the company in your case does not own the property, Section 17(2)(i) does not apply. Instead, Section 17(2)(ii) is applicable.

In summary, rent paid by the company on behalf of the employee is treated as a perquisite and should be included in the employee's taxable income, regardless of whether the company is also paying HRA to the employee.