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CS Executive · Tax Laws and Practice · Income under the Head Salary

Under section 392 of the Income-tax Act, 2025, an employer may choose to pay tax on a non-monetary perquisite from its own funds instead of deducting it from the employee. At what rate is that tax determined?

The tax is worked out at the average rate of income-tax, based on the estimated income under the head Salaries including the non-monetary perquisite, for the tax year of payment. It is treated as if deducted at source from salary. No flat or maximum marginal rate applies.

  1. AAt the average rate computed on the estimated income under the head Salaries, including the perquisiteCorrect
  2. BAt a flat rate of 10% of the perquisite value
  3. CAt the maximum marginal rate applicable to individuals
  4. DAt the rate in force for the tax year in which the employee joined

Explanation

Section 392(2)(b) says the tax is determined at the average rate under sub-section (1) on income under the head Salaries including the perquisite. It is treated as tax deducted at source. A flat 10% or the maximum marginal rate is not prescribed there.

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