Sub-section (1) is an inclusive definition of "perquisite" for this Part, running through nine clauses. Clause (a) brings in the value of rent-free accommodation provided by the employer, computed in the prescribed manner, and clause (b) the value of accommodation at a concessional rate to the extent it exceeds the rent recoverable from or payable by the assessee. Clause (c) covers any benefit or amenity granted free of cost or at a concessional rate in two cases only: (i) by a company to an employee who is a director or who has a substantial interest in the company, and (ii) by any employer to any other employee whose income under the head "Salaries" by way of monetary payment, from one or more employers, exceeds such amount as may be prescribed. Clause (d) covers specified securities or sweat equity shares allotted or transferred by the current or a former employer free or at a concession, clause (e) any other prescribed benefit or amenity, and clause (f) any sum paid by the employer in discharge of an obligation that would otherwise have been the employee's.
Clause (g) brings in sums payable by the employer to effect a life assurance or an annuity contract, whether directly or through a fund, but expressly excludes a recognised provident fund, an approved superannuation fund and a Deposit-linked Insurance Fund under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 or section 6C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. Clause (h) taxes the aggregate employer contribution in excess of Rs. 750000 in a tax year across three vehicles taken together — a recognised provident fund, the scheme referred to in section 124(1), and an approved superannuation fund. Clause (i) adds the annual accretion by way of interest, dividend or any other amount of similar nature to the balance in those funds, computed in the prescribed manner, to the extent it relates to the contribution referred to in clause (h).
Sub-section (2) carves six categories out of sub-section (1): medical treatment in a hospital maintained by the employer; sums paid for expenditure actually incurred on treatment in a Government, local authority or Government-approved hospital, or for prescribed diseases in a hospital approved by the Principal Chief Commissioner or Chief Commissioner; the employer's portion of a health insurance premium under a scheme approved for section 30(c); a sum paid by the employer for a premium the employee paid on a health policy under a scheme approved for section 126; employer expenditure on a vehicle for the journey between residence and place of work; and expenditure on medical treatment abroad, on travel and stay abroad for the employee or a family member, and on travel and stay of one attendant. Sub-section (3) limits the last of these: the treatment and stay abroad are excluded only to the extent permitted by the Reserve Bank of India, and the travel component is excluded only where the employee's gross total income, computed before including that expenditure, does not exceed a prescribed amount.
Sub-section (4) supplies the definitions — fair market value by a prescribed method, "family" as in Schedule III (Note 2), "gross total income" as in section 122(10), "hospital" as including a dispensary, clinic or nursing home, "option" as a right but not an obligation to apply at a predetermined price, "specified security" by reference to section 2(h) of the Securities Contracts (Regulation) Act, 1956 including securities offered under an employees' stock option plan, and "sweat equity shares". Clause (h) of sub-section (4) fixes the valuation rule for clause (1)(d): fair market value on the date the option is exercised, reduced by the amount actually paid by or recovered from the assessee.
Why it is there
Salary paid in kind is still salary, and the section stops an employer converting cash remuneration into housing, shares, insurance or the discharge of the employee's own bills. The clause (h) aggregation exists because the three retirement vehicles are separately attractive and would otherwise allow an unlimited tax-free employer contribution when used together. The sub-section (2) exclusions concede that medical cost is not remuneration, and sub-section (3) confines that concession so that the overseas limb does not become a benefit for the well paid.
Who it applies to
An employee provided with accommodation, a benefit or an amenity by an employer
An employee who is a director of the employer company or who has a substantial interest in it
An employee whose salary by way of monetary payment, from one or more employers, exceeds the prescribed amount
An employee allotted specified securities or sweat equity shares by a current or former employer
An employer valuing perquisites for the purpose of the salary computation
An employee for whom employer contributions to a recognised provident fund, the section 124(1) scheme and an approved superannuation fund together exceed Rs. 750000 in a tax year
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Aggregate employer contribution treated as a perquisite
The excess over Rs. 750000 in a tax year
Aggregate of contributions to a recognised provident fund, the scheme referred to in section 124(1) and an approved superannuation fund, taken together, made to the account of the assessee by the employer
Sub-section (1)(h)
Threshold of salary by monetary payment for clause (c)(ii)
Such amount as may be prescribed
Income under the head "Salaries" by way of monetary payment from one or more employers, for an employee who is not a director or a substantial-interest employee; the section states no amount of its own
Sub-section (1)(c)(ii)
Ceiling on the exclusion for medical treatment and stay abroad
Only to the extent permitted by the Reserve Bank of India
Expenditure falling within sub-section (2)(f); the Act sets no rupee figure
Sub-section (3)(a)
Income limit for the exclusion of travel abroad
Such amount as may be prescribed
Gross total income of the employee, computed before including the travel expenditure, must not exceed it; gross total income has the meaning in section 122(10)
Sub-section (3)(b)
Value of a specified security or sweat equity share
Fair market value on the date of exercise, less the amount actually paid or recovered
Fair market value is itself determined by a prescribed method under sub-section (4)(a); the trigger date is exercise of the option, not grant or vesting
Sub-section (4)(h)
What this means in practice
Two dates decide the share perquisite and only one of them is in the section: the value is fixed on the date the option is exercised, not when it is granted or when it vests, and the fair market value on that date is worked out by a prescribed method, reduced by whatever the employee actually paid. The Rs. 750000 limit in clause (h) is a single aggregate across three funds, so an employer contribution that is comfortably within limits in each fund separately can still generate a perquisite when added together, and clause (i) then taxes the accretion attributable to that excess as well. Sub-section (2) is a list of exclusions, not a general medical exemption: treatment abroad comes out only within the Reserve Bank's permission, and the travel component only for an employee under the prescribed gross total income figure. Note also that clause (c) is not a general charge on benefits — a benefit given free or cheap is a perquisite under that clause only if the employee is a director or substantial-interest employee, or is paid more than the prescribed monetary salary; other benefits reach the charge, if at all, through clause (e) as prescribed.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
An employer contributes Rs. 400000 to a recognised provident fund, Rs. 300000 to the scheme referred to in section 124(1) and Rs. 200000 to an approved superannuation fund for one employee in a tax year. No single contribution looks large, but the aggregate is Rs. 900000, so Rs. 150000 is a perquisite under clause (1)(h). The interest and other accretion during the year on the balance, to the extent it relates to that Rs. 150000, is a further perquisite under clause (1)(i), computed in the prescribed manner.
Where you meet this section
You meet this section in the perquisite figure your employer builds into the salary computation on which tax is deducted, and again in an assessment where the Assessing Officer values accommodation, a share allotment or an employer-paid obligation that the salary computation left out.
The words themselves
aggregate amount of any contribution, in excess of Rs. 750000 in a tax year, made to the account of the assessee by the employer
Section 17(1)(h), Income-tax Act, 2025.
the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, on the date on which the option is exercised by the assessee, as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares.
Section 17(4)(h), Income-tax Act, 2025.
the expenditure on medical treatment and stay abroad shall be excluded from the perquisite only to the extent permitted by the Reserve Bank of India
Section 17(3)(a), Income-tax Act, 2025.
any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee
Section 17(1)(f), Income-tax Act, 2025.
What people get wrong
Applying the Rs. 750000 limit fund by fund. Clause (1)(h) aggregates the recognised provident fund, the section 124(1) scheme and the approved superannuation fund and taxes the excess over Rs. 750000 across all three.
Forgetting the accretion. Clause (1)(i) taxes the interest, dividend or similar accretion to the balance to the extent it relates to the clause (h) contribution, so the perquisite does not stop at the excess contribution itself.
Valuing employee shares at the grant or vesting date. Sub-section (4)(h) fixes fair market value on the date the option is exercised, less the amount actually paid or recovered.
Reading clause (1)(c) as taxing every free or concessional benefit. It applies only to a director or substantial-interest employee, or to an employee whose monetary salary exceeds the prescribed amount; other benefits are caught only if prescribed under clause (e).
Assuming all overseas medical expenditure is outside perquisite. Sub-section (3)(a) confines the treatment and stay exclusion to what the Reserve Bank of India permits, and sub-section (3)(b) allows the travel exclusion only below a prescribed gross total income.
Treating employer payments towards life assurance or annuity as always taxable. Clause (1)(g) excludes a recognised provident fund, an approved superannuation fund and the Deposit-linked Insurance Funds it names.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
17 - “Salary”, “perquisite” and “profits in lieu of salary” defined
Rules of the Income-tax Rules, 2026 that work section 17. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.
Rule 15 — Valuation of perquisites — on reading the rule
Rule 16 — Annual accretion referred to in section 17(1)(i)
Rule 17 — Salary income for purposes of section 17(1)(c)(ii)
Rule 18 — Exemption of medical benefits from perquisite value in respect of medical treatment of prescribed diseases or ailments in hospitals approved by the Chief Commissioner — on reading the rule
Rule 19 — Gross total income for purposes of section 17(3)(b)
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 3/2025 — Income tax deduction from salaries during the financial year 2024 25 under section 192 of the income tax act 1961 2025-02-20
Circular No. 2/2010 — Section 115WM of the Income-tax Act, 1961 - Fringe Benefit Tax - Chapter XII-H not to apply after a certain date - Adjustment of ‘ 2010-01-29
Circular No. 8/2005 — CIRCULAR FINANCE ACT, 2005 - FBT Finance Act, 2005 - Explanatory Notes on the Provisions relating to Fringe Benefit Tax 2005-08-29
Circular No. 761 — 1184. Clarifications regarding use of Form No. 16 for pensioners where pensioners are drawing their pensions through banks 1998-01-13
Circular No. 710 — 202. Taxability of the perquisite on shares issued to employees at less than market price 1995-07-24
Circular No. 701 — 18. Taxability of allowances received by persons having income under the head ‘Salaries’ 1995-03-23
Circular No. 644 — 371. Whether provision of food or beverages in places other than place of work in respect of low-paid employees can be treated as 1993-03-15
Circular No. 451 — Clarifications on issues relating to effect of filing higher estimates of income for advance tax purposes on assessments for earl 1986-02-17
Circular No. 442 — 1512. Appointment of estate duty valuers for different categories of assets and scale of charges for their remuneration - Notifica 1985-12-10
Circular No. 431 — 624. Relief in case of encashment of leave salary by an employee while in service - Whether admissible 1985-09-12
Circular No. 331 — Section 89 l Relief When Salary ETC., Is Paid in Arrears or in Advance 1982-03-22
Circular No. 293 — 181. Pension received by erstwhile officials of United Nations - Whether exempt from tax in view of section 2 of UN (Privileges an 1981-02-10
Circular No. 196 — 946. Whether tax is not to be deducted at source from conveyance allowance where disbursing authority is satisfied that conveyance 1976-03-31
Circular No. 189 — 276. Development rebate reserve in the case of industrial undertakings in which there is Government participation and where there 1976-01-30
Circular No. 153 — Section 2(38) l Recognized Provident Fund 1974-11-30
Circular No. 130 — Section 17(2)/RULE 3 l Perquisite and ITS Valuation 1974-03-16
Circular No. 122 — Rule 3(g) of Income-tax Rules - Valuation of perquisibte on account of services of household servants 1973-10-19
Circular No. 32 — Limit on allowance in respect of benefit, amenity or perquisite under clause (c)(iii)/clause (a)(v) - Reimbursement of certain exp 1969-10-29
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Notification No. 94 — Income-tax (Thirteenth Amendment) Rules, 2009 - Substitution of rule 3 and Insertion of rule 40F 2009-12-18
Notification No. 70 — Amendment in Electronic Furnishing of Return of Income Scheme, 2007 2009-09-22
Notification No. 271 — Income-tax (Fourteenth Amendment) Rules, 2007 - Amendments in rule 3 - Valuation of perquisites 2007-11-07
Notification No. 003 — S.O. (E).-In exercise of the powers conferred by section 295 read with rule 3 of Part A of the Fourth Schedule to the Income-tax A 2007-01-15
Notification No. 68 — Amendment of the Income-tax Rules under section 17 of the Income-tax Act, 1961 2005-02-28
Notification No. 291 — Amendment of the Income-tax Rules under section 3 of the Income-tax Act, 1961 2004-12-07
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 17. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
V.M. Salgaocar & Bros P Ltd v CITSupreme CourtHelps taxpayertagged s.17(2) For old years, was an interest-free loan from my employer taxable as a perquisite?
Manjeet Singh Chawla v Dy CIT (TDS)High CourtHelps taxpayertagged s.17(2) If the payment for the fall in option value is not salary, is it capital gains?
Nishithkumar Mukeshkumar Mehta v Dy CITHigh CourtHelps departmenttagged s.17(2) Is compensation for the fall in value of stock options taxable as salary if I keep the options?
Ravi Kumar Sinha v CITHigh CourtHelps taxpayertagged s.17(2) I was allotted shares under an employee stock purchase scheme but they carry a lock-in and I cannot sell them. Can the perquisite be valued at the…
Sanjay Baweja v Dy CITHigh CourtHelps taxpayertagged s.17(2)(vi) My employer paid me for the fall in value of options I never exercised. Is that a perquisite?
ACIT v Subhodh MenonITATHelps taxpayertagged s.17 I subscribed for less than my share of a rights issue. Can the AO still tax the discount?
Pramod Kumar Jain v DCITITATHelps taxpayertagged s.17(2)(vi) The company bought back my vested options before I exercised them. Salary or capital gains?
Rajesh R Hemrajani v ITOITATHelps taxpayertagged s.17(2)(vi) When I sell esop shares, is my cost of acquisition under section 49(2AA) the fair market value used for the perquisite even if that perquisite was…
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
