Section 14 — Method for determining amount of expenditure in relation to income not includible in total income

(1) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts:—
(a) the amount of expenditure directly relating to income which does not form part of total income; and
(b) an amount equal to 1% of the annual average of the monthly averages of the opening and closing balances of the value of investment, income fromwhich does not or shall not form part of total income.(2) The amounts referred to in sub-rule (1) shall not exceed the total expenditure claimed by the assessee.
Valuation of perquisites.
15.(1) For the purpose of computing the income chargeable under the head "Salaries", the value of perquisites provided by the employer, either directly orindirectly, to the assessee (herein referred to as the employee) or to any member of his household by reason of his employment, shall be determined inaccordance with the provisions of this rule.
(2)(a) The value of residential accommodation provided by the employer, for the purpose of section 17(1)(a) and (b), during the tax year, in the circumstancesreferred in column B of the following Table I, shall be determined in accordance with the column C or column D thereof, as the case may be:
TABLE I
Sl.No. Circumstances Where accommodation is unfurnished Where accommodation is furnished
A B C D
(1) Where the accommodation is provided by theCentral Government or any State Government, tothe employees either holding office or post inconnection with the affairs of the Union or ofsuch State.
License fee determined by the Central Government orany State Government in respect of accommodation inaccordance with the rules framed by such Governmentas reduced by the rent actually paid by the employee.
Value of perquisite is determined as per theprovisions of sub-rule (2)(e)
(2) Where the accommodation is provided by anyother employer and—
(a) where the accommodation is owned bythe employer; or (i) 10% of salary in cities having populationexceeding forty lakhs as per 2011 census inrespect of the period during which the saidaccommodation was occupied by theemployee during the tax year as reduced bythe rent, if any, actually paid by the employee;(ii) 7.5% of salary in cities having populationexceeding fifteen lakhs but not exceedingforty lakhs as per 2011 census in respect ofthe period during which the saidaccommodation was occupied by theemployee during the tax year as reduced bythe rent, if any, actually paid by the employee;and(iii) 5% of salary in other areas, in respect of theperiod during which the said accommodationwas occupied by the employee during the taxyear as reduced by the rent, if any, actuallypaid by the employee.
Value of perquisite is determined as per theprovisions of sub-rule (2)(e)
(b) where the accommodation is taken onlease or rent by the employer. Actual amount of lease rental paid or payable by theemployer or 10% of salary, in respect of the periodduring which the said accommodation was occupiedby the employee during the tax year, whichever islower, as reduced by the rent, if any, actually paid bythe employee.
Value of perquisite is determined as per theprovisions of sub-rule (2)(e).
(3) Where the accommodation is provided by theemployer specified in serial number (1) or (2) ina hotel (except where the employee is providedsuch accommodation for a period not exceedingin aggregate fifteen days on his transfer from oneplace to another).
Not applicable. Actual charges paid or payable to such hotelor 24% of salary paid or payable for the taxyear for the period during which suchaccommodation is provided, whichever islower, as reduced by the rent, if any, actuallypaid or payable by the employee.
(b) The provisions of this sub-rule shall not apply to any accommodation temporarily provided to an employee working at a mining site or an on-shore oilexploration site or a project execution site, or a dam site or a power generation site or an off-shore site; which —
(i) having plinth area not exceeding 1000 square feet, is located not less than eight kilometres away from the local limits of any municipality or acantonment board; or(ii) is located in a remote area.
(c) Where on account of his transfer from one place to another, the employee is provided with accommodation at the new place of posting while retaining theaccommodation at the other place, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value withreference to Table I for a period not exceeding ninety days and thereafter the value of perquisite shall be charged for both such accommodations as provided inthe said Table I.
(d) Where the accommodation is owned or taken on lease or rent by the employer and the same accommodation is continued to be provided to the sameemployee for more than one tax year, the amount calculated in accordance with Table I: Sl. No. 2(a) or (b) shall not exceed the amount so calculated for thefirst tax year, as multiplied by the amount which is a ratio of the Cost Inflation Index for the tax year for which the amount is calculated and the Cost InflationIndex for the tax year in which the accommodation was initially provided to the employee.
(e) For the purposes of this sub-rule, where the accommodation is furnished:—
(i) the value of perquisite as determined under Table I: Sl. Nos. 1 and 2. C be increased by 10% per annum of the cost of furniture (including televisionsets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment), as reduced by any charges paid or payable for the sameby the employee during the tax year; and(ii) if such furniture is hired from a third party, the value of perquisite would be the actual hire charges payable for the same as reduced by any chargespaid or payable for the same by the employee during the tax year.(f) For the purposes of this sub-rule, where the accommodation is provided by the Central Government or any State Government to an employee, who isserving on deputation with any body or undertaking under the control of such Government,—
(i) the employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation; and
(ii) the value of perquisite of such an accommodation shall be the amount calculated in accordance with Table I: Sl. No. 2(a), as if the accommodation isowned by the employer.(g) For the purposes of clause (d);
(i) "Cost Inflation Index" means the index as may be notified by the Central Government under section 72(8)(a);
(ii) "first tax year" means the tax year 2023-2024, or the tax year in which the accommodation was provided to the employee, whichever is later.
(3)(a) The value of perquisite by way of use of motor car to an employee by an employer, in the circumstances as referred in column B of the following TableII, shall be determined in accordance with column C or column D thereof, as the case may be:
TABLE II
VALUE OF PERQUISITE PER CALENDAR MONTH
Sl.No.
Circumstances Where cubic capacity of engine does not exceed1.6 litres or the motor car is an electric vehicle Where cubic capacity of engine exceeds 1.6 litres
A B C D
(1) Where the motor car is owned or hired bythe employer and—
(a)is used wholly and exclusively in theperformance of his official duties;no value, if the documents specified in sub-rule (3)(c)are maintained by the employer. no value, if the documents specified in sub-rule (3)(c)are maintained by the employer;
(b)is used exclusively for the private orpersonal purposes of the employee orany member of his household and therunning and maintenance expensesare met or reimbursed by theemployer;
actual amount of expenditure incurred by theemployer on the running and maintenance of motorcar during the relevant tax year includingremuneration, if any, paid by the employer to thechauffeur as increased by the amount representingnormal wear and tear of the motor car and as reducedby any amount charged from the employee for suchuse.
actual amount of expenditure incurred by theemployer on the running and maintenance of motorcar during the relevant tax year includingremuneration, if any, paid by the employer to thechauffeur as increased by the amount representingnormal wear and tear of the motor car and as reducedby an amount charged from the employee for suchuse.
(c) is used partly in the performance of duties and partly for private or personal purposes of his own or any member of his household and—
(i) the expenses on maintenanceand running are met orreimbursed by the employer;
Rs. 5,000 (plus Rs. 3,000, if chauffeur is also providedto run the motor car by the employer)Rs. 7,000 (plus Rs. 3,000, if chauffeur is alsoprovided to run the motor car by the employer);
(ii) the expenses on running andmaintenance for private orpersonal use are fully met by theassessee.
Rs. 2,000 (plus Rs. 3,000, if chauffeur is also providedby the employer to run the motor car by theemployer).
Rs. 3,000 (plus Rs. 3,000, if chauffeur is alsoprovided to run the motor car by the employer).
(2) Where the employee owns a motor car but the actual running and maintenance charges (including remuneration of the chauffeur, if any) are met orreimbursed to him by the employer and—
(a)such reimbursement is for the use ofthe vehicle wholly and exclusivelyfor official purposes;
no value, if the documents specified in sub-rule (3)(c)are maintained by the employerno value, if the documents specified in sub-rule (3)(c)are maintained by the employer;
(b)such reimbursement is for the use ofthe vehicle partly for officialpurposes and partly for personal orprivate purposes of the employee orany member of his household.
the actual amount of expenditure incurred by theemployer as reduced by the amount specified in Sl.No. (1)(c)(i) above, if the conditions mentioned insub-rule (3)(c) are fulfilled.
the actual amount of expenditure incurred by theemployer as reduced by the amount specified in Sl.No. (1)(c)(i) above, if the conditions mentioned insub-rule (3)(c) are fulfilled.
(3) Where the employee owns any other automotive conveyance but the actual running and maintenance charges are met or reimbursed to him by theemployer and
(a)such reimbursement is for the use ofthe vehicle wholly and exclusivelyfor official purposes;
no value, if the documents specified in sub-rule (2)(c)are maintained by the employernot applicable;
(b)such reimbursement is for the use ofvehicle partly for official purposesand partly for personal or privatepurposes of the employee.
the actual amount of expenditure incurred by theemployer as reduced by the amount of Rs. 3,000 if theconditions mentioned in sub-rule (3)(c) are fulfilled.

(b) Where an employer owns or hires one or more motor cars and allows the employee or any member of his household to use them for the purposes other thanwholly and exclusively in the performance of his duties, the value of perquisite shall be the amount calculated as below:
(i) for one car, in accordance with Table II: Sl. No. (1)(c)(i); and
(ii) for other cars, in accordance with Table II: Sl. No. (1)(b).
(c) If the employer or employee claims that the motor vehicle is used solely for official duties or that the actual expenses for running and maintaining theemployee-owned motor vehicle for official purposes exceed the deductible amounts in Table II: Sl. No. 2(b) or 3(b), he may claim a higher amount for officialuse and in this case, the value of the perquisite shall be the actual amount of expenses paid or reimbursed by the employer, minus the higher amount attributedto official use of the vehicle provided that the following conditions are fulfilled: —
(i) the employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage andthe amount of expenditure incurred thereon; and(ii) the employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.
(d) For the purposes of this sub-rule, the normal wear and tear of a motor car shall be taken at 10% per annum of the actual cost of the motor car or cars.
(4) The value of benefit provided by the employer to the employee or any member of his household for goods, services or utilities, as referred to in column Bof the following Table III, shall be computed in accordance with column C thereof:—
TABLE III
Sl.No. Nature of goods, services or utilities Value of benefit of the goods, services or utilitiesprovided
A B C
1. Services of a sweeper, a gardener, a watchman or a personal attendant.The total amount of salary paid or payable by the employeror any other person on his behalf for such services asreduced by any amount paid by the employee for suchservices.
2. (a) Supply of gas, electric energy or water for the consumption of the employee'shousehold by purchasing them from any outside agency. The amount paid by the employer to the agency supplyingthe gas, electric energy or water, as reduced by any amountpaid by the employee in respect of such services.
(b) Supply of gas, electric energy or water for the consumption of the employee'shousehold made from resources owned by the employer, without purchasing them fromany outside agency
The amount of the manufacturing cost per unit incurred bythe employer, as reduced by any amount paid by theemployee in respect of such services.
3. (a) Provision of free or concessional educational facilities for any member of theemployee's household. The amount of expenditure incurred by the employer in thisregard, as reduced by any amount paid or recovered fromthe employee on that account.
(b) Provision of free or concessional educational facilities for any member of employeehousehold, where the educational institution is itself maintained and owned by theemployer.
Cost of such education in a similar institution in or near thelocality, as reduced by any amount paid or recovered fromthe employee on that account, where the cost of sucheducation or value of such benefit per child exceeds Rs.3,000 per month.
(c) Provision of free educational facilities for any member of employees' household in anyother educational institution by reason of his employment.Cost of such education in a similar institution in or near thelocality, as reduced by any amount paid or recovered fromthe employee on that account, where the cost of sucheducation or value of such benefit per child exceeds Rs.3,000 per month.
4. Provision by an employer who is engaged in the carriage of passengers or goods, to anyemployee (not being an employee of an airline or the railways) or to any member of hishousehold, for personal or private journey free of cost or at concessional fare, in anyconveyance owned, leased or made available by any other arrangement by such employerfor the purpose of transport of passengers or goods.
Value at which such benefit or amenity is offered by suchemployer to the public as reduced by the amount, if any,paid by or recovered from the employee for such benefit oramenity.
(5)(a) In terms of provisions contained in section 17(1)(e), the value of other benefits or amenities of the nature referred to in Column B of the following TableIV shall be determined in accordance with column C and subject to conditions provided in Column D thereof:—
TABLE IV
Sl.No. Nature of other benefits or amenities Value of perquisite Conditions
A B C D
1. Benefit from the provision of interest-freeor concessional loan for any purpose madeavailable to the employee or any member ofhis household during the relevant tax yearby the employer or any person on hisbehalf.
It shall be the sum equal to the interest computed atthe annual rate charged by the State Bank of India,constituted under the State Bank of India Act, 1955(23 of 1955), as on the 1st day of the relevant tax yearin respect of loans by the bank for the same purpose,using the maximum outstanding monthly balance asreduced by the interest, if any, actually paid by him orany such member of his household.
(a) No value would be charged if such loansare made available for medical treatmentin respect of diseases specified in rule 18or where the amount of loans is notexceeding Rs. 2,00,000 in the aggregate;and(b) where the benefit relates to the loans madeavailable for medical treatment referred toin clause (a), the exemption so providedshall not apply to so much of the loan ashas been reimbursed to the employeeunder any medical insurance scheme.
2. The value of travelling, touring,accommodation and any other expensespaid for or borne or reimbursed by theemployer for any holiday availed of by theemployee or any member of his household,other than concession or assistance referredto in rule 277.
It shall be the sum equal to the amount of theexpenditure incurred by such employer in that behalf.(a) Where such facility is maintained by theemployer, and is not available uniformlyto all employees, the value of benefit shallbe taken to be the value at which suchfacilities are offered by other agencies tothe public; or(b) where the employee is on official tour andthe expenses are incurred in respect of anymember of his household accompanyinghim, the amount of expenditure soincurred shall be an amenity; or(c) where any official tour is extended as avacation, the value of such fringe benefitshall be limited to the expenses incurred inrelation to such extended period of stay orvacation as reduced by the amount, if any,paid or recovered from the employee forsuch benefit or amenity.
3. The value of free food and non-alcoholicbeverages provided by the employer to anemployee.
It shall be the amount of expenditure incurred by suchemployer as reduced by the amount, if any, paid orrecovered from the employee for such benefit oramenity.
This provision shall not apply to(a) free food and non-alcoholic beveragesprovided by such employer duringworking hours at office or businesspremises or through paid vouchers usableonly at eating joints, to the extent thevalue thereof in either case does notexceed Rs. 200 per meal; or(b) tea or snacks provided during workinghours; or(c) free food and non-alcoholic beveragesduring working hours provided in aremote area or an off-shore installation.
4. The value of any gift, or voucher, or token(in lieu of gift) received by the employee orby member of his household on ceremonialoccasions or otherwise from the employer.
It shall be the sum equal to the amount of such gift.It shall be 'nil', if the value of such gift, voucher ortoken, as the case may be, is below Rs. 15,000 inaggregate during the tax year.
5. The amount of expenses includingmembership fees and annual fees incurredby the employee or any member of hishousehold, which is charged to a credit card(including any add-on-card) provided by theemployer, or otherwise, paid for orreimbursed by such employer.
It shall be the amount taken to be the value ofperquisite chargeable to tax as reduced by the amount,if any paid or recovered from the employee for suchbenefit or amenity.
There shall be no value of such benefit, whereexpenses are incurred wholly and exclusively forofficial purposes and the conditions specified insub-rule (5)(b) are fulfilled.
6. The value of benefit to the employeeresulting from the payment orreimbursement by the employer of anyexpenditure incurred (including the amountof annual or periodical fee) in a club by himor by a member of his household.
It shall be determined to be the actual amount ofexpenditure incurred or reimbursed by such employeron that account and the amount so determined shall bereduced by the amount, if any paid or recovered fromthe employee for such benefit or amenity.
(a) Where the employer has obtainedcorporate membership of the club and thefacility is enjoyed by the employee or anymember of his household, the value ofperquisite shall not include the initial feepaid for acquiring such corporatemembership; and(b) the provision given in column C of Sl. No.6 shall not apply, if such expenditure isincurred wholly and exclusively forbusiness purposes and the followingconditions are fulfilled:—(i) conditions in sub-rule (5)(b) arefulfilled; and(ii) use of health club, sports andsimilar facilities are provideduniformly to all employees by theemployer.
7. The value of benefit to the employeeresulting from the use by the employee orany member of his household of anymovable asset (other than assets alreadyspecified in this rule and other than laptops,computers, tablets and mobile phones)belonging to the employer or hired by him.
It shall be determined at 10% per annum of the actualcost of such asset or the amount of rent or charge paidor payable by the employer, as the case may be, asreduced by the amount, if any, paid or recovered fromthe employee for such use.

8. The value of benefit to the employee arisingfrom the transfer of any movable assetbelonging to the employer directly orindirectly to the employee or any memberof his household
It shall be determined to be the amount representingthe actual cost of such assets to the employer asreduced by the cost of normal wear and tear and asfurther reduced by the amount, if any, paid orrecovered from the employee being the considerationfor such transfer.
The cost of normal wear and tear shall becalculated at the rate of(a) 50% in case of computers and electronicitems, by reducing balance method;(b) 20% in the case of motor cars, by reducingbalance method; and(c) 10% in case of other assets,of the cost of the asset for each completed yearduring which such asset was put to use by theemployer.
9. The value of any other benefit or amenity,service, right or privilege provided by theemployer, except expenses on telephones,including a mobile phone.
It shall be determined on the basis of cost to theemployer under an arm's length transaction as reducedby the employee's contribution, if any.

(b) For the purposes of clauses (a) of Table IV: Sl. Nos. 5 and 6. C, the following conditions need to be satisfied:—
(i) complete details in respect of such expenditure are maintained by the employer which may, inter alia, include the date of expenditure and the nature ofexpenditure;(ii) the employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of officialduties.(6) For the purposes of section 17(1)(d), the fair market value of any specified security or sweat equity share, being an equity share in a company, on the dateon which the option is exercised by the employee, shall be determined as follows:—
(a) in a case where, on the date of the exercising of the option, the share in the company is listed on a recognised stock exchange, the fair market valueshall be the average of the opening price and closing price of the share on that date on the said stock exchange, subject to the provisions of clause (b);(b) in a case where, on the date of exercising of the option, the share is listed on more than one recognised stock exchanges, the fair market value shall bethe average of the opening price and closing price of the share on the recognised stock exchange which records the highest volume of trading in theshare;(c) in a case where, on the date of exercising of the option, there is no trading in the share on any recognized stock exchange, the fair market value shall be—(i) the closing price of the share on any recognised stock exchange on a date closest to the date of exercising of the option and immediatelypreceding such date; or(ii) the closing price of the share on a recognised stock exchange, which records the highest volume of trading in such share, if the closing price,as on the date closest to the date of exercising of the option and immediately preceding such date, is recorded on more than one recognisedstock exchange;(d) in a case where, on the date of exercising of the option, the share in the company is not listed on a recognised stock exchange, the fair market valueshall be such value of the share in the company as determined by a merchant banker on the specified date.(7) For the purposes of section 17(1)(d), the fair market value of any specified security, not being an equity share in a company, on the date on which theoption is exercised by the employee, shall be such value as may be determined by a merchant banker on the specified date.
(8) For the purposes of this rule—
(a) "accommodation" includes a house, flat, farm house or part thereof, or accommodation in a hotel, motel, service apartment, guest house, caravan,mobile home, ship or other floating structure;(b) "closing price" of a share on a recognised stock exchange on a date shall be the price of the last settlement on such date on such stock exchange, andwhere the stock exchange quotes both "buy" and "sell" prices, the closing price shall be the "sell" price of the last settlement;(c) "entertainment" includes hospitality of any kind and also, expenditure on business gifts other than free samples of the employer's own product with theaim of advertising to the general public;(d) "hotel" includes licensed accommodation in the nature of motel, service apartment or guest house;
(e) "maximum outstanding monthly balance" means the aggregate outstanding balance for each loan as on the last day of each month.
(f) "member of household" shall include—(i) spouse;(ii) children and their spouses;(iii) parents; and(iv) servants and dependants;(g) "merchant banker" means category I merchant banker registered with Securities and Exchange Board of India established under section 3 of theSecurities and Exchange Board of India Act, 1992 (15 of 1992);(h) "opening price" of a share on a recognised stock exchange on a date shall be the price of the first settlement on such date on such stock exchange andwhere the stock exchange quotes both "buy" and "sell" prices, the opening price shall be the "sell" price of the first settlement;(i) "recognised stock exchange" shall have the same meaning assigned to it in section 2(f) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(j) "remote area", specified in sub-rule (1)(b), means any area other than an area which is located—(i) within the local limits of; or(ii) within a distance, measured aerially, of thirty kilometers from the local limits of, any municipality or a cantonment board having a populationof one lakh or more based on the 2011 census;(k) "salary" includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called, fromone or more employers, as the case may be, but does not include the following:—(i) dearness allowance or dearness pay, unless it enters into the computation of superannuation or retirement benefits of the employee concerned;(ii) employer's contribution to the provident fund account of the employee;(iii) allowances, which are exempted from payment of tax;(iv) the value of perquisites specified in section 17(1);
(v) any payment or expenditure specifically excluded under section 17(2); and(vi) lump-sum payments received at the time of termination of service or superannuation or voluntary retirement, like gratuity, severance pay,leave encashment, voluntary retrenchment benefits, commutation of pension and similar payments;(l) "specified date" means—(i) the date of exercising of the option; or(ii) any date earlier than the date of the exercising of the option, not being a date which is more than one hundred and eighty days earlier than thedate of the exercising.