Monday, 28 January 2013

Valuation of perquisite in respect of free education for Income Tax Purposes

Perquisites provided by the employer (directly or indirectly) to the employee or any member of his household (by reason of his employment) is considered as per Income Tax Act, 1961 and the valuation of the same is done in accordance with the provisions laid down.
“Member of household” shall include –
a. Spouse, whether dependent or not;
b. Children and their spouses, whether dependent or not;
c. Parents, whether dependent or not;
d. Servants and dependants.
Valuation of perquisite in respect of free education is provided below.
Training of employees
Amount spent for providing free education facilities to, and training of, the employee is not taxable.
Fixed education allowance for children
Fixed education allowance given in cash by the employer to the employee to meet the cost of education of the family members of the employee is not taxable to the extent of Rs. 100 per month per child for a maximum of 2 children.
An additional exemption is available in respect of allowance granted to meet hostel expenditure @ Rs. 300 per month per child for a maximum of 2 children. The remaining amount is taxable in all cases.
Payment of school fees of employee’s children
School fees of the family members of the employee paid by the employer directly to the school is taxable as a perquisite.
Reimbursement of school fees of employee’s children
Reimbursement of expenditure incurred for education of the family members of the employee is taxable as a perquisite. Any such reimbursement of tuition fees to the Central Government employee is, therefore, taxable.
Education facility in employer’s institute
Where the educational institution is owned and maintained by the employer and educational facility is provided or where such educational facility is provided in any institute by reason of employee’s employment with the employer.
a. Where educational facility is provided to employee’s children
• Where cost of education or value of such benefit does not exceed Rs. 1,000 per month per child (no restriction on number of children) – Amount is not chargeable to tax.
• Where such amount exceeds Rs. 1,000 per month per child – Amount chargeable to tax is computed as under:
Cost of such education in a similar institution in or near the locality
Less: Rs. 1,000 per month per child
Less: Amount paid or recovered from the employee
b. Where educational facility is provided to a member of his household other than children
Amount chargeable to tax is computed as under:
Cost of such education in a similar institution in or near the locality
Less: Amount paid or recovered from the employee
Scholarship
Amount of scholarship given by the employer-company to children of its employees solely at its discretion without

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