The Federal Board of Revenue (FBR) has clarified how perquisites will be treated under the updated Income Tax Ordinance, 2001 for the tax year 2025-26.
Perquisites refer to additional benefits or facilities provided by employers beyond basic pay, and they play a significant role in determining an employee’s taxable income.
What Are Perquisites?
Perquisites are non-cash benefits or privileges that employees receive in addition to their salary. According to Section 13 of the Ordinance, the value of these benefits must be computed and added to the employee’s taxable income for the relevant tax year.
Examples include:
• Use of a company vehicle for personal purposes
• Provision of a housekeeper, driver, or other domestic staff
• Free or subsidized housing or accommodation
• Utilities such as electricity, water, gas, and telephone services provided by the employer
• Loans at below-market interest rates or interest waivers
• Transfer of property or assets at discounted rates
Interactive Check – Do You Receive Perquisites?
• Does your employer provide a company car or cover household staff salaries?
• Are you offered subsidized accommodation or utilities?
• Did you receive any property, services, or loan benefits from your employer this year?
If your answer is “yes” to any of these, chances are that the value of these perquisites will be added to your taxable income for 2025-26.
How Are Perquisites Valued?
The value of perquisites is determined based on fair market value or according to prescribed methods under the tax rules. For example:
• If a vehicle is provided for partial private use, a fixed amount based on vehicle value and usage may be taxed.
• When an employer provides domestic staff, the total salary paid to such staff is treated as taxable unless the employee reimburses part of the cost.
• In case of loans, the taxable value is calculated based on the difference between the benchmark interest rate and the rate actually paid by the employee.
Why Does It Matter?
Perquisites often constitute a substantial portion of executive and managerial compensation packages. Failing to account for them properly may lead to underreporting of income and potential penalties. Employees should ensure that their employer-issued salary certificates reflect the correct value of all perquisites to avoid tax discrepancies.
What’s New for 2025-26?
The updated rules stress stricter valuation methods and a broader definition of benefits considered as perquisites. Items such as property transfers, employer-paid obligations, and services not previously categorized are now clearly included. This ensures that the taxable income calculation is more comprehensive and transparent.
Interactive Tip for Employees
• Review your pay structure and list all non-cash benefits you receive.
• Cross-check with your HR or payroll department to ensure perquisites are valued correctly.
• If unsure, consult a tax advisor to avoid surprises during assessment.
Disclaimer
This article is for informational purposes only and does not constitute tax advice. Employees should consult the Federal Board of Revenue (FBR) or a qualified tax professional to confirm how perquisites apply to their specific situation in tax year 2025-26.