Perquisites Valuation: Car, Rent-Free Accommodation, Loans and ESOPs (Income Tax Act 2025)

A perquisite is a benefit your employer gives you because of your job, other than your cash salary. Section 17 of the Income-tax Act, 2025 lists what counts (rent-free housing, a company car, cheap loans, ESOPs and more), and rule 15 of the Income-tax Rules, 2026 says how to put a rupee value on each. That value is added to your income under "Salaries". For the car, the monthly value is Rs 5,000 for a car up to 1.6 litres used partly for work with the employer bearing running costs (Rs 2,000 if the employee bears the private running costs); for company-owned housing, the value is 5%, 7.5% or 10% of salary, depending on the city.

This guide goes through section 17 and rule 15 benefit by benefit, with the numbers from the Rules and worked examples for tax year 2026-27. Law as amended by the Finance Act, 2026. Last reviewed against that text on 10 November 2026.

What is a perquisite under section 17 of the Income-tax Act, 2025?

Section 17(1) says a perquisite includes the following. The list is not closed, because clause (e) lets the Rules add other benefits.

Clause	What it covers	Where the value comes from
17(1)(a)	Rent-free accommodation from the employer	Rule 15(2), Table I
17(1)(b)	Accommodation at a concessional rent (value in excess of rent recoverable or payable by the employee)	Rule 15(2), Table I
17(1)(c)	Benefits or amenities given free or at a concession, to a director or an employee with substantial interest in the company, or to any other employee whose monetary salary is above the prescribed amount	Rule 15(3) to (5); threshold in rule 17
17(1)(d)	Specified securities or sweat equity shares allotted free or at a concession (ESOPs)	Section 17(4)(h); rule 15(6) and (7)
17(1)(e)	Any other benefit or amenity prescribed	Rule 15(5), Table IV
17(1)(f)	Any sum the employer pays for an obligation that would otherwise be the employee's	Amount paid
17(1)(g)	Employer's payment for the employee's life assurance or annuity contract, other than to a recognised provident fund, an approved superannuation fund or a Deposit-linked Insurance Fund	Amount payable
17(1)(h)	Employer contributions above Rs 7,50,000 in a tax year, taken together across a recognised provident fund, the scheme in section 124(1) and an approved superannuation fund	Excess over Rs 7,50,000
17(1)(i)	Annual accretion (interest, dividend or similar) on that excess contribution	Rule 16 formula

The rules treat benefits given to the employee or any member of the household as the employee's perquisite. Under rule 15(8)(f), "member of household" includes the spouse, children and their spouses, parents, and servants and dependants.

How is a perquisite valued, step by step?

How is rent-free or concessional accommodation valued?

Rule 15(2), Table I, values housing for section 17(1)(a) and (b). The figures depend on who the employer is and how the house is held.

Situation (Table I)	Unfurnished	Furnished
Sl. No. 1. Provided by the Central or a State Government to its employees	Licence fee fixed by that Government, less rent actually paid by the employee	As per rule 15(2)(e)
Sl. No. 2(a). Other employer, house owned by the employer	10% of salary if the city had a population above 40 lakh (2011 census); 7.5% if above 15 lakh up to 40 lakh; 5% in other areas. Counted for the period of occupation, less rent paid by the employee	As per rule 15(2)(e)
Sl. No. 2(b). Other employer, house taken on lease or rent	Actual lease rental paid or payable by the employer, or 10% of salary, whichever is lower, for the period of occupation, less rent paid by the employee	As per rule 15(2)(e)
Sl. No. 3. Hotel accommodation (other than up to 15 days in aggregate on a transfer)	Not applicable	Actual hotel charges or 24% of salary for the period, whichever is lower, less rent paid or payable by the employee

Points that change the number:

• Furnished housing (rule 15(2)(e)). Add 10% a year of the cost of furniture, television sets, radios, refrigerators, other household appliances and air-conditioning equipment, less what the employee pays for them. If the furniture is hired from a third party, add the actual hire charges instead, less what the employee pays.
• "Salary" for these percentages (rule 15(8)(k)). It means pay, allowances, bonus, commission or any monetary payment. It leaves out dearness allowance (unless it counts for retirement benefits), the employer's provident fund contribution, exempt allowances, the perquisites themselves, section 17(2) items and lump sums at retirement such as gratuity and leave encashment.
• Transfers (rule 15(2)(c)). If you keep your old house and get a new one on transfer, only the one with the lower value is charged for up to 90 days. After that, both are charged.
• Remote sites (rule 15(2)(b)). Temporary housing at a mining site, on-shore oil exploration site, project execution site, dam site, power generation site or off-shore site is outside this sub-rule if it is in a remote area, or is up to 1,000 square feet and at least eight kilometres from a municipality or cantonment board.
• Same house for several years (rule 15(2)(d) and (g)). For Sl. No. 2(a) or 2(b), the later-year value cannot exceed the first-year value multiplied by the Cost Inflation Index ratio. The "first tax year" is 2023-24 or the year the house was first provided, whichever is later.

Worked example 1: employer-owned flat in a large city, tax year 2026-27

Ravi works in a city with a 2011 population above 40 lakh. His employer owns the flat and he lives in it for all 12 months. Assumptions: salary as defined in rule 15(8)(k) is Rs 12,00,000 for the year; Ravi pays Rs 6,000 a month as rent; the flat comes with furniture and appliances that cost the employer Rs 2,00,000, for which Ravi pays nothing.

Step	Working	Rs
1. Base value (Table I, Sl. No. 2(a)(i))	10% x 12,00,000	1,20,000
2. Rent Ravi pays	6,000 x 12	72,000
3. Unfurnished value	1,20,000 - 72,000	48,000
4. Furniture addition (rule 15(2)(e)(i))	10% x 2,00,000	20,000
Perquisite for the year	48,000 + 20,000	68,000

Had the same flat been in a city with 15 to 40 lakh people, step 1 would use 7.5% (Rs 90,000). In other areas it would be 5% (Rs 60,000).

How is a company car valued as a perquisite?

Rule 15(3), Table II, gives a value per calendar month. The columns depend on engine size: up to 1.6 litres (or an electric vehicle), or above 1.6 litres.

Employer's car, used...	Up to 1.6 litres, or electric	Above 1.6 litres
Wholly for official duties	No value, if the rule 15(3)(c) documents are kept	No value, if the documents are kept
Only for private use, with running costs met or reimbursed by the employer	Actual running and maintenance cost incl. chauffeur pay, plus wear and tear, less what the employee pays	Same
Partly official, partly private, employer bears running costs	Rs 5,000 (plus Rs 3,000 if a chauffeur is provided)	Rs 7,000 (plus Rs 3,000 if a chauffeur is provided)
Partly official, partly private, employee bears the private running costs	Rs 2,000 (plus Rs 3,000 if a chauffeur is provided)	Rs 3,000 (plus Rs 3,000 if a chauffeur is provided)

Other car situations in rule 15(3):

• Employee's own car, employer reimburses running costs (Table II, Sl. No. 2). Wholly official: no value if the documents are kept. Partly official: actual expenditure by the employer, reduced by the Rs 5,000 or Rs 7,000 figure above (by engine size), if the conditions in rule 15(3)(c) are met.
• Employee's own other vehicle, such as a two-wheeler (Sl. No. 3). Wholly official: no value if documents are kept. Partly official: actual expenditure, reduced by Rs 3,000, if the conditions are met.
• More than one car (rule 15(3)(b)). If the employee or household may use several employer cars for non-official purposes, one car is valued under the "partly official, employer bears costs" row; the others under the "private use" row.
• Wear and tear (rule 15(3)(d)). 10% a year of the actual cost of the car.
• Records (rule 15(3)(c)). To claim official use, the employer must keep journey details (date, destination, mileage, expenditure) and give a certificate that the spending was wholly and exclusively for official duties.

Worked example 2: two company cars, tax year 2026-27

Meena, a manager, gets a 1.2-litre company car with a chauffeur. She uses it for work and for family trips. The employer pays all running costs. She also gets a second, 2.0-litre car from the company which her family uses privately; the employer pays its running costs too. Assume the second car's actual running, maintenance and chauffeur cost is Rs 1,80,000 for the year and the car cost Rs 12,00,000; she pays nothing.

Car	Working	Rs for the year
Car 1 (one car under Table II, Sl. No. (1)(c)(i), up to 1.6 litres, with chauffeur)	(5,000 + 3,000) x 12	96,000
Car 2, running cost (Sl. No. (1)(b))	Actual cost	1,80,000
Car 2, wear and tear (rule 15(3)(d))	10% x 12,00,000	1,20,000
Total perquisite	96,000 + 1,80,000 + 1,20,000	3,96,000

How is an interest-free or cheap employer loan valued?

Under rule 15(5), Table IV, Sl. No. 1, the benefit is interest at the State Bank of India rate on the 1st day of the tax year for loans of the same type, applied to the maximum outstanding monthly balance, less any interest the employee actually paid. The maximum outstanding monthly balance is the balance of each loan on the last day of each month (rule 15(8)(e)).

No value is charged if (a) the loans are for treatment of the diseases specified in rule 18, or (b) the loans total no more than Rs 2,00,000 in aggregate. For medical loans, the exemption does not cover the part reimbursed under a medical insurance scheme.

Worked example 3: concessional loan, tax year 2026-27

Kiran's employer lends him Rs 5,00,000 for a personal purpose on 1 April 2026. Assumptions: the balance stays at Rs 5,00,000 at every month-end; the SBI rate for that type of loan on 1 April 2026 is 9% a year (an assumed figure for this example, not a quoted rate); Kiran pays the employer 3% a year.

Step	Working	Rs
1. Interest at SBI rate	5,00,000 x 9% (12 months, same balance each month)	45,000
2. Interest Kiran paid	5,00,000 x 3%	15,000
Perquisite	45,000 - 15,000	30,000

If Kiran's loan were Rs 1,80,000 for the same purpose and it were his only loan from the employer, the value would be nil, since the aggregate is within Rs 2,00,000.

How are ESOPs and sweat equity valued?

Section 17(1)(d) taxes the value of specified securities or sweat equity shares allotted free or at a concession by the current or a former employer. Under section 17(4)(h), the value is the fair market value on the date the option is exercised, minus the amount the employee actually paid. The tax point is the exercise date, not the grant date.

Fair market value under rule 15(6) for equity shares:

• Listed on one exchange: average of the opening and closing price on the exercise date.
• Listed on more than one exchange: the same average, on the exchange with the highest trading volume.
• Listed, but no trade on the exercise date: the closing price on the closest earlier date (on the highest-volume exchange if more than one).
• Unlisted: value fixed by a Category I merchant banker registered with SEBI, as on the "specified date".

For securities that are not equity shares, rule 15(7) uses a merchant banker's value. The "specified date" (rule 15(8)(l)) is the exercise date, or any earlier date not more than 180 days before it.

Worked example 4: listed-company ESOP, tax year 2026-27

Asha exercises options for 500 shares of her listed employer at an exercise price of Rs 200 a share. On the exercise date the share opens at Rs 1,010 and closes at Rs 990 on the exchange with the highest volume.

Step	Working	Rs
1. Fair market value per share	(1,010 + 990) / 2	1,000
2. Less price paid per share	1,000 - 200	800
Perquisite	800 x 500	4,00,000

How are gifts, meals, club fees and other benefits valued?

Rule 15(5), Table IV, covers other benefits under section 17(1)(e). The common ones:

Benefit	Value	Relief
Gift, voucher or token on ceremonial or other occasions	The amount of the gift	Nil if below Rs 15,000 in aggregate in the tax year
Free food and non-alcoholic drinks	Employer's expenditure, less employee's payment	Not charged for meals at office or via vouchers usable only at eating joints up to Rs 200 per meal; tea or snacks in working hours; remote areas and off-shore installations
Holiday travel, touring and stay paid by the employer (other than rule 277 concessions)	Employer's expenditure	Special treatment for uniformly available facilities, accompanied household members on an official tour and extended official tours (Table IV, Sl. No. 2)
Credit card expenses incl. fees	The amount, less employee's payment	No value if wholly and exclusively official, with records and a certificate (rule 15(5)(b))
Club expenses and fees	Actual amount, less employee's payment	Initial fee of a corporate membership excluded; no value for wholly business use, uniformly available health and sports facilities, with records and a certificate
Use of a movable asset (not laptops, computers, tablets, mobile phones)	10% a year of the asset's cost, or the rent or charge paid by the employer, less employee's payment	None
Transfer of a movable asset to the employee	Cost to the employer, less wear and tear, less the employee's payment. Wear and tear: 50% reducing balance for computers and electronic items; 20% reducing balance for motor cars; 10% of cost per completed year for others	None
Any other benefit or amenity (except telephone expenses, incl. mobile)	Cost to the employer at arm's length, less employee's contribution	None

Rule 15(4), Table III, adds household services and education: the salary paid for a sweeper, gardener, watchman or personal attendant; gas, electricity and water supplied by the employer (purchase cost from the supplier, or the employer's manufacturing cost per unit if self-produced); and free or concessional education for a household member. Where the employer owns the school, or the education is free in another school because of the job, the benefit is charged only where the cost per child exceeds Rs 3,000 a month.

Who is taxed on these benefits, and from what salary level?

For section 17(1)(a), (b), (d) and the other clauses above, the benefit is taxable whatever the salary. The general "free or concessional benefit or amenity" clause, section 17(1)(c), works differently:

• It applies to every benefit for a director of a company or an employee with a substantial interest in it (17(1)(c)(i)).
• For any other employee, it applies only if the monetary salary from one or more employers exceeds Rs 4,00,000 (section 17(1)(c)(ii), rule 17).

What if the employer pays into provident fund or pension above Rs 7,50,000?

Section 17(1)(h) taxes the part of the employer's contributions above Rs 7,50,000 in a tax year, counted together across a recognised provident fund, the pension scheme referred to in section 124(1) and an approved superannuation fund. Section 17(1)(i) taxes the yearly interest or other accretion on that excess, computed under rule 16 as:

TP = (PC / 2) x R + (PC1 + TP1) x R

TP is the taxable accretion for the year, PC is this year's excess contribution, PC1 and TP1 are the earlier years' excess contributions and taxed accretions (from tax years starting on or after 1 April 2020), and R is the fund's income for the year divided by the average of its opening and closing balances.

Worked example 5: contribution above the limit, tax year 2026-27

Kiran's employer contributes Rs 5,00,000 to the recognised provident fund, Rs 3,00,000 to the section 124(1) pension scheme and Rs 1,50,000 to an approved superannuation fund in the year.

Step	Working	Rs
1. Aggregate employer contribution	5,00,000 + 3,00,000 + 1,50,000	9,50,000
2. Limit in section 17(1)(h)		7,50,000
Taxable perquisite	9,50,000 - 7,50,000	2,00,000

Interest on that Rs 2,00,000 would be taxed separately each year under section 17(1)(i) and rule 16.

Who pays the tax on a perquisite, and how is it reported?

The employee is taxed, but the employer collects the tax through payroll under section 392. Four points from that section matter for perquisites:

• Deduction at the average rate (section 392(1)). The employer deducts tax on the estimated Salaries income of the year, which includes the perquisite values, at the average rate for that year.
• Employer can pay the tax on non-monetary perquisites (section 392(2)). For a non-monetary perquisite taxable under section 17(1), the employer may choose to pay the tax itself, on all or part of the value, instead of deducting it from the employee. The tax is worked out at the average rate on Salaries income that includes the perquisite, and is treated as if it were tax deducted at source from salary.
• Statement of perquisites (section 392(5)(a)). The employer must give the employee a statement, in the prescribed form, with correct and complete particulars of each perquisite and its value.
• Eligible start-up ESOPs (section 392(3) and section 289(3)). If the employer is an eligible start-up under section 140, the ESOP tax is computed at the rates of the tax year of allotment or transfer, but the employee need not pay it at once. It falls due within 14 days of the earliest of: 60 months from the end of that tax year, the sale of the shares, or the employee leaving that employer.

Because the value is part of Salaries income, an employer who gets a value wrong (for example by skipping the car records) understates the TDS, and the employee carries the shortfall into their return.

Which employer benefits are not perquisites?

Section 17(2) says section 17(1) does not apply to:

• medical treatment of the employee or family in a hospital maintained by the employer (17(2)(a));
• the employer's payment of the employee's treatment costs in a Government or local authority hospital or another hospital approved by the Government, and, for the prescribed diseases, in a hospital approved by the Principal Chief Commissioner or Chief Commissioner (17(2)(b)). Rule 18(3) lists the diseases, for example cancer, tuberculosis, AIDS, and ailments needing surgery or hospital stay of at least three continuous days (seven for drug addiction);
• employer-paid health insurance premium under a scheme approved for section 30(c), and the employer's payment of the employee's health insurance premium under a scheme approved for section 126 (17(2)(c) and (d));
• vehicle expenses for the journey between home and the office or workplace (17(2)(e));
• medical treatment abroad, and travel and stay abroad for the patient and one attendant (17(2)(f)).

For the foreign treatment items, section 17(3) limits the exclusion: medical expenses and stay only to the extent the Reserve Bank of India permits, and the travel exclusion only if the employee's gross total income before including that expense does not exceed Rs 8,00,000 (section 17(3)(b), rule 19).

What are the common mistakes with perquisite valuation?

• Using the whole salary figure. The percentages work on "salary" as rule 15(8)(k) defines it, which excludes items such as the employer's provident fund contribution and exempt allowances.
• Forgetting the furniture addition. A furnished house adds 10% a year of the furniture cost, or the hire charges, on top of the base value.
• Treating Rs 15,000 as a per-gift limit. Rule 15(5), Table IV, Sl. No. 4, tests gifts, vouchers and tokens in aggregate for the tax year, and below Rs 15,000 is nil. Once they reach Rs 15,000 the value is the amount of the gifts, not only the excess.
• Skipping the car records. "No value" for official use depends on the journey records and employer certificate under rule 15(3)(c).
• Taxing ESOPs on grant. The valuation date is the exercise date, and the amount paid by the employee is deducted.
• Missing the loan balance rule. The SBI rate is fixed as on the 1st day of the tax year, but the base is the maximum outstanding balance at each month-end.

Quick reference: key numbers

Item	Figure	Source
Salary threshold for section 17(1)(c)(ii)	Rs 4,00,000	Rule 17
Employer fund contribution limit	Rs 7,50,000 a year	Section 17(1)(h)
Gross total income cap for foreign travel exclusion	Rs 8,00,000	Section 17(3)(b), rule 19
Owned accommodation	10% / 7.5% / 5% of salary	Rule 15(2), Table I, Sl. No. 2(a)
Hotel accommodation	Lower of actual charges or 24% of salary	Rule 15(2), Table I, Sl. No. 3
Car, partly official, employer pays	Rs 5,000 or Rs 7,000 a month, plus Rs 3,000 for a chauffeur	Rule 15(3), Table II
Loan with no perquisite	Aggregate up to Rs 2,00,000	Rule 15(5), Table IV, Sl. No. 1
Gifts with no perquisite	Below Rs 15,000 a year	Rule 15(5), Table IV, Sl. No. 4
Meals with no perquisite	Up to Rs 200 per meal	Rule 15(5), Table IV, Sl. No. 3
Education benefit threshold	Rs 3,000 per child per month	Rule 15(4), Table III, Sl. No. 3

Where is this in the Act and the Rules?

• Section 17 of the Income-tax Act, 2025: perquisite, exclusions, definitions of fair market value, option, specified security, sweat equity
• Rule 15: valuation of perquisites (Tables I to IV, ESOP fair market value, definitions)
• Section 392(1), (2), (3), (5) and section 289(3): TDS on salary, employer-paid tax on non-monetary perquisites, perquisite statement, start-up ESOP timing
• Rule 16: annual accretion on excess provident fund and pension contributions
• Rule 17: Rs 4,00,000 salary threshold; Rule 18: hospitals and diseases; Rule 19: Rs 8,00,000 gross total income

Perquisites flow into salary income, which your employer reports and deducts tax on. For how the Act is structured overall, see our guide on what changes under the Income-tax Act, 2025.

How do CA firms keep track of salary and perquisite work for clients?

For a firm with many salaried and employer clients, the hard part is collecting the facts: the car log, the loan balances each month, the ESOP exercise dates. Finexo's practice management software helps you track which clients owe which documents and when they are due. It does not value perquisites for you.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.