Perquisites and Form 12BA

A company flat, a car with a driver, a low-interest loan, meal cards, a festival gift or shares under an employee stock option plan are all salary, even though no cash changes hands. The tax depends on a value the law fixes, not on what the benefit is worth to the employee. Those values were rewritten from 1 April 2026. The Income-tax Rules, 2026 raised the car figures, the meal and gift limits and the loan threshold sharply. The salary level that brings an ordinary employee within the wider perquisite charge rose from Rs 50,000 to Rs 4,00,000 a year earlier, for assessment year 2026-27. The employer reports the values in a separate statement, Form 12BA, now Form No. 123. This guide sets out what is taxed, how it is valued and how it is reported under both Acts.

Which Act governs which year

• Financial year 2025-26 (assessment year 2026-27) and earlier. Perquisites are defined in section 17(2) of the Income-tax Act, 1961. They are valued under rule 3 of the Income-tax Rules, 1962. The employer’s statement is Form No. 12BA under rule 26A(2) of the 1962 Rules.
• Tax year 2026-27 onwards. Perquisites are defined in section 17 of the Income-tax Act, 2025. They are valued under rule 15 of the Income-tax Rules, 2026. The statement is Form No. 123 under rule 204(2).
• Earlier years continue under the 1961 Act by section 536(2) of the 2025 Act.

Perquisites are taxed in both regimes. The new regime takes away exemptions. It does not take any perquisite out of salary.

What counts as a perquisite

Section 17(2) of the 1961 Act and section 17(1) of the 2025 Act list the same main items:

Perquisite	1961 Act	2025 Act
Rent-free accommodation	s.17(2)(i)	s.17(1)(a)
Accommodation at a concessional rate	s.17(2)(ii)	s.17(1)(b)
Any benefit or amenity, free or concessional, to a director, a person with substantial interest, or a “specified employee”	s.17(2)(iii)	s.17(1)©
An obligation of the employee paid by the employer	s.17(2)(iv)	s.17(1)(f)
Life assurance or annuity paid by the employer, outside approved funds	s.17(2)(v)	s.17(1)(g)
Specified securities or sweat equity shares	s.17(2)(vi)	s.17(1)(d)
Employer’s contributions to provident fund, pension scheme and superannuation fund above Rs 7,50,000 a year, and the accretion on the excess	s.17(2)(vii), (viia)	s.17(1)(h), (i)
Any other benefit or amenity prescribed	s.17(2)(viii)	s.17(1)(e)

Both Acts exclude certain medical benefits:

• treatment in the employer’s own hospital, or in a government or approved hospital;
• premiums on approved health insurance; and
• treatment abroad, within limits.

These are in the proviso to section 17(2) and section 17(2) of the 2025 Act. Under both Acts, the employer’s vehicle used for travel between home and office is not a benefit for the amenity charge. This is the Explanation to section 17(2)(iii) and section 17(2)(e) of the 2025 Act.

The “specified employee” threshold: Rs 4,00,000

The general amenity charge in section 17(2)(iii)© reaches an employee who is neither a director nor a substantial shareholder only where his salary, “exclusive of the value of all benefits or amenities not provided for by way of monetary payment”, exceeds a limit. For years up to AY 2025-26 that limit was Rs 50,000. The Finance Act, 2025 replaced it, from 1 April 2026, with “such amount as may be prescribed”.

Threshold	AY 2026-27 (1961 Act)	Tax year 2026-27 (2025 Act)
Monetary salary above which the general amenity charge applies	Rs 4,00,000: rule 3C, 1962 Rules	Rs 4,00,000: rule 17, 2026 Rules, for s.17(1)©(ii)
Gross total income up to which travel abroad for medical treatment is excluded	Rs 8,00,000: rule 3D, 1962 Rules	Rs 8,00,000: rule 19, 2026 Rules, for s.17(3)(b)

Rules 3C and 3D were inserted by the Income-tax (Twenty Second Amendment) Rules, 2025, Notification No. 133/2025 of 18 August 2025. Before AY 2026-27 the medical travel limit was Rs 2,00,000.

The threshold is measured on salary “from one or more employers”, so a person with two jobs in the year adds both. It matters only for the general charge. Accommodation, an obligation paid by the employer, stock options and the excess retirement contributions are perquisites for every employee.

How the main perquisites are valued, old and new

Rule 3 of the 1962 Rules and rule 15 of the 2026 Rules follow the same scheme. The amounts changed as below. The 1962 figures are those in rule 3 for FY 2025-26. The 2026 figures are from rule 15.

Benefit	Rule 3, 1962 Rules (to FY 2025-26)	Rule 15, 2026 Rules (from tax year 2026-27)
Accommodation owned by a private employer, unfurnished	10, 7.5 or 5 per cent of salary, by city population under the 2011 census (above 40 lakh; 15 to 40 lakh; elsewhere), less rent paid	Unchanged: Table I, serial number 2(a)
Accommodation leased by the employer	Lease rent or 10 per cent of salary, whichever is lower, less rent paid	Unchanged: Table I, serial number 2(b)
Employer’s car used partly for private purposes, expenses met by employer	Rs 1,800 a month (engine up to 1.6 litres) or Rs 2,400 (above), plus Rs 900 for a chauffeur	Rs 5,000 a month (up to 1.6 litres, or an electric vehicle) or Rs 7,000 (above), plus Rs 3,000 for a chauffeur: Table II, serial number 1©(i)
Same car, private running expenses met by employee	Rs 600 or Rs 900 a month, plus Rs 900 for a chauffeur	Rs 2,000 or Rs 3,000 a month, plus Rs 3,000 for a chauffeur: Table II, serial number 1©(ii)
Interest-free or concessional loan	Nil if loans do not exceed Rs 20,000 in aggregate, or are for specified diseases	Nil if loans do not exceed Rs 2,00,000 in aggregate, or are for diseases in rule 18: Table IV, serial number 1
Free meals in working hours or meal vouchers	Excluded up to Rs 50 a meal	Excluded up to Rs 200 a meal: Table IV, serial number 3
Gifts, vouchers and tokens	Nil if below Rs 5,000 in the year	Nil if below Rs 15,000 in the year: Table IV, serial number 4
Free education in the employer’s own or another school	Charged where the value per child exceeds Rs 1,000 a month	Charged where the value per child exceeds Rs 3,000 a month: Table III, serial number 3
Use of the employer’s movable assets	10 per cent a year of cost or hire charge; computers and laptops excluded	Same, excluding laptops, computers, tablets and mobile phones: Table IV, serial number 7

For a car used wholly for official duties, no value arises if the employer keeps journey records and certifies that the use was official. This is rule 15(3)©, carried over from rule 3. Where an employee owns the car and the employer meets its running costs, the value is the employer’s expenditure less the standard figure for official use.

“Salary” for accommodation and these purposes is defined in rule 15(8)(k) of the 2026 Rules. It is pay, allowances, bonus, commission and other monetary payments from one or more employers. It excludes:

• dearness allowance not counted for retirement benefits;
• the employer’s provident fund contribution;
• exempt allowances;
• perquisites; and
• lump sums on leaving, such as gratuity, leave encashment and commutation.

Stock options and sweat equity

The perquisite on stock options is the fair market value on the date the option is exercised, less what the employee paid. Section 17(2)(vi) and its Explanation, and section 17(1)(d) and 17(4)(h) of the 2025 Act, provide for this. Rule 15(6) values a listed share at the average of the opening and closing prices on the exercise date. Where the share trades on more than one exchange, the exchange with the highest volume is used. An unlisted share is valued by a category I merchant banker as on the exercise date or a date up to 180 days earlier.

An employee of an eligible start-up can have the tax deferred. Section 192(1C) of the 1961 Act and section 392(3) of the 2025 Act provide for this.

Tax borne by the employer

An employer may pay the tax on non-monetary perquisites itself, at its option. Section 192(1A) of the 1961 Act and section 392(2) of the 2025 Act allow this. The tax so paid is not further income of the employee. It is exempt under section 10(10CC) of the 1961 Act and Schedule III serial number 10 of the 2025 Act.

Form 12BA and Form No. 123: the employer’s statement

Rule 26A(2) of the 1962 Rules requires the employer to give the employee a statement of “correct and complete particulars of perquisites or profits in lieu of salary and the value thereof”:

• in the relevant columns of Form No. 16, where salary paid or payable is not more than Rs 1,50,000; or
• in Form No. 12BA, where it is more.

Rule 204(2) of the 2026 Rules repeats this for tax year 2026-27 onwards. The statement goes in the relevant columns of Form No. 130 (the counterpart of Form 16) up to Rs 1,50,000, and in Form No. 123 above it. The duty sits in section 392(5)(a) of the 2025 Act. Rule 204(3) gives “salary” the meaning in rule 15.

Form 12BA, and Form No. 123, list each perquisite with three figures:

• the value under the rules;
• the amount recovered from the employee; and
• the taxable amount.

The taxable total flows into the salary figure in Part B of Form 16, and from there into the salary schedule of the return. The Form 16 itself is covered in TDS Certificates: Form 16 and 16A. The employer’s deduction and deposit of the tax is covered in Deducting and Depositing TDS.

What can be corrected, and where

The values are fixed by the rules, and the return must use the rule values. If the employer has applied the wrong rule, or a wrong year’s figures, the employee reports the correct value in the return and keeps the working. A common example is the 1962 car figures used for a month after March 2026. The tax deducted is still credited as shown in Form 16. The employer’s correction route, a revised quarterly statement, is described in Correction Statements and TRACES Defaults.

What to have ready

• Form 12BA or Form No. 123 from each employer for the year, and Form 16 Part B, which carries the totals.
• For accommodation: the city, the period occupied, whether it is owned or leased by the employer, the lease rent, and any rent recovered.
• For a car: engine capacity or whether it is electric, whether a chauffeur was provided, who met the running costs, and any official-use records and certificate.
• For loans: the outstanding balance at the end of each month and the State Bank of India rate on 1 April of the year.
• For stock options: the grant letter, the exercise date and price, and the fair market value on that date.
• Monetary salary from all employers, to test the Rs 4,00,000 threshold.

In order

1. The perquisite is identified under section 17(2) of the 1961 Act or section 17(1) of the 2025 Act.
2. For a general benefit, the Rs 4,00,000 test is applied to monetary salary from all employers. It applies from AY 2026-27; earlier years used Rs 50,000.
3. The value is computed under rule 3 for years to FY 2025-26, or rule 15 for tax year 2026-27 onwards. Any recovery from the employee is deducted.
4. The employer reports the values in Form 12BA or Form No. 123 where salary exceeds Rs 1,50,000, and otherwise in Form 16 or Form No. 130.
5. The taxable value enters salary in the return. Any error in the employer’s figures is corrected in the return, on the employee’s own working.

The next guide, Changing Jobs: Two Employers in One Year, deals with salary from more than one employer in a year.