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In today’s workplace, employers often provide various assets for personal use by the employees or their household members. These assets can range from vehicles to household appliances and gadgets, and they often come with specific tax considerations. This article delves into the intricacies of the perquisite value of movable assets other than the Motor Car/Motor Vehicle, laptops and computers provided by employers and explores how these benefits are taxed.

Valuation of Movable Assets 

When an employer provides movable assets for the personal use of an employee or any member of their household, the value of this benefit must be determined for tax purposes. According to Rule 3(7)(vii) of the Income-Tax Rules, the perquisite value, excluding cars, vehicles, laptops, computers and other assets that are governed by other rules, is calculated at a rate of 10% per annum of the actual cost of the asset or the amount of rent or charge paid or payable by the employer. This value is then reduced by any amount recovered by the employer from the employee.

This standardised approach ensures consistency in calculating the taxable benefit derived from the use of these assets. For example, if an employer provides a mobile phone to an employee for personal use and the phone's actual cost is ₹1,00,000, the taxable perquisite value would be ₹10,000 per annum (10% of ₹1,00,000).

Reduction by Employee Contribution

If the employee makes any payments towards the use of the provided assets, these amounts are deducted from the taxable perquisite value. This adjustment ensures that the taxable benefit reflects the actual cost borne by the employee.

For instance, consider an employee who pays ₹500 per month towards the use of a company-provided mobile phone (which has a perquisite value of ₹10,000 per annum). The total contribution made by the employee would be ₹6,000 annually (₹500 x 12). Therefore, the taxable perquisite value would be reduced to ₹4,000 per annum (₹10,000 - ₹6,000).

Practical Considerations

To ensure compliance with tax regulations, employers must maintain accurate records of the actual cost of movable assets provided to employees, as well as any rent or charges paid for their use. Detailed records facilitate the calculation of the taxable perquisite value and ensure transparency.

Employees, on the other hand, should be aware of the tax implications of using employer-provided movable assets and understand the contributions they may need to make. Keeping track of payments made towards the use of such assets can help reduce the taxable benefit, aligning it with the actual cost incurred by the employee.

Conclusion

The taxation of movable assets provided by employers involves a standardized method for calculating the taxable benefit derived from their use. It is crucial for both employers and employees to understand this valuation method and adhere to tax regulations to ensure compliance. By maintaining accurate records and being mindful of their tax liabilities, employers and employees can effectively manage the tax implications associated with the personal use of employer-provided movable assets.

Employers should proactively educate their employees about these tax implications and encourage accurate record-keeping. Employees should take the initiative to understand their tax responsibilities and make informed contributions towards the use of company-provided assets. This collaborative effort will ensure a smooth and compliant approach to managing the taxation of the personal use of company gadgets and other movable assets.

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[Disclaimer- The article is only for educational purposes and is not to be construed as tax advice. The relevant provisions of the Income-tax Act may be referred to, for complete understanding.]