Q.What is a 'Perquisite' under Section 17(2) of the Income Tax Act, 1961? Are all benefits an employee receives from an employer necessarily taxable? Explain, with two examples of perquisites that are kept entirely tax-free.

A perquisite is any benefit or amenity attached to a job, over and above salary — but not every such benefit is taxed.

Under Section 17(2), a perquisite is any casual emolument, benefit or amenity attached to an office or position, granted by an employer to an employee in addition to salary or wages — it may be provided in cash, but is far more commonly provided in kind (accommodation, a car, free or subsidised goods, and so on). Not every perquisite an employee receives, however, ends up taxable: the Act and Rules keep a specific, named list of perquisites entirely OUTSIDE the tax net, regardless of their monetary value, precisely because taxing genuinely welfare-oriented or work-related benefits like these would discourage employers from providing them. Two such tax-free examples: (i) medical treatment provided to the employee (or a specified family member) in a hospital maintained by the employer, a Government hospital, or a hospital approved for a prescribed disease; and (ii) recreational facilities, such as health-c …

Assuming EVERY non-cash benefit an employer provides must automatically be a taxable perquisite — a specific, named list (covered in this section) is kept tax-free by …