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Perquisites for official purposes not to be taxed — Onus on employer to furnish details

Hema Ramakrishnan
K.R. Srivats

NEW DELHI, Aug. 4

CREDIT card, motor car and club expenses reimbursed to employees will henceforth not be taxed as perquisites if the employer certifies that the expenses have been incurred "wholly and exclusively" for official purposes.

In line with the decision taken over a month ago, the Central Board of Direct Taxes (CBDT) has officially notified the relaxation in perquisite rules for motorcars, credit cards and club expenses. The changes have come into force from August 1, this year.

Extensive documentation requirements - by the employer, employee and supervisor - were required earlier for claiming a higher amount against official use. Now, the onus is solely on the employer to furnish these details.

To claim a higher amount of tax exemption on motor cars, the employer will now be required to maintain complete details of journey undertaken for official purpose, which may include date of journey, destination, mileage and the amount of expenditure incurred, the CBDT has said.

The employer would also have to furnish a certificate saying that the expenditure was incurred "wholly and exclusively" for official purposes.

The perquisite value of small cars and large cars has been pegged at Rs 1,200 per month and Rs 1,600 per month respectively. Employees who incur expenses higher than the stipulated ceiling can claim a higher deduction if the employer furnishes the perquisite certificate. The perquisite value will hence be the difference between actual amount of expenditure reimbursed by the employer and the higher amount attributable to official use.

For reimbursement of credit card expenses (including membership fees and annual fees), the employer has to maintain complete details of such expenditure. This should cover the date of expenditure as well as nature of expenditure.

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