Perquisite valuation is the step where payroll converts a non-cash benefit into a rupee figure that can be added to salary and taxed. The Income Tax Rules prescribe the method for each benefit, so the taxable value is a formula result, not what the employer actually spent. For what counts as a perquisite in the first place, see the main page; this one covers the arithmetic.

How the common ones are valued

• Rent-free or concessional accommodation: a percentage of salary, set by the city’s population band, less any rent the employee pays. If the employer leases the house, the lower of the lease rent paid and the prescribed percentage generally applies. Furniture adds a further amount.
• Company car: a fixed monthly figure that depends on engine size and whether the employer also pays for a driver and running costs. Cars used only for office work carry no perquisite, which needs a log to prove.
• Loans at low or nil interest: the gap between a benchmark SBI lending rate and the rate charged, applied to the outstanding balance month by month. Small loans and loans for specified medical treatment are exempt.
• ESOPs: fair market value on the exercise date minus what the employee paid. For listed shares the market price on that date is the reference; for unlisted shares a merchant banker’s valuation is used.
• Meals and gifts: free food, gift vouchers and similar items are valued at cost, with a small exempt threshold.

The 1961 Rules and the 2026 Rules

For FY 2025-26 the valuation rules are Rule 3 of the Income-tax Rules, 1962. From 1 April 2026 the Income-tax Rules, 2026 apply, and several secondary summaries report that many of the fixed values were raised. Examples reported consistently are the car perquisite going from Rs 1,800 to Rs 5,000 a month for engines up to 1.6 litres (Rs 2,400 to Rs 7,000 above that), the exempt meal value from Rs 50 to Rs 200 per meal, and the gift exemption from Rs 5,000 to Rs 15,000 a year. The accommodation percentages are reported differently by different sources, so read the Rules text before you set them in payroll. Employers report perquisites in Form 12BA for FY 2025-26, and secondary sources show the new Rules renumbering that to Form 123.

Where payroll teams slip

The usual errors are using last year’s car values after the rule change, forgetting that salary for the accommodation percentage excludes some components, and valuing ESOPs on the grant date instead of the exercise date. The perquisite also feeds CTC planning: a benefit that looks free in the offer letter increases taxable salary, so the take-home effect should be shown to the employee.

Frequently asked questions

Does the employer or the employee pay tax on a perquisite?

The employee owes the tax, but the employer collects it through TDS under Section 192 (Section 392 from tax year 2026-27) by adding the perquisite value to monthly taxable pay.

Are perquisites valued the same in both tax regimes?

Yes. The valuation rules do not change with the regime. Only the slab rates and deductions around them change.

Is there a calculator for the tax effect of a perk?

You can add the perquisite value to the salary in the income tax calculator to see how much extra tax it triggers.

For the cash side of the package, look at the car allowance and fuel reimbursement page.