Indian income tax | Salary perquisites | Section 10(10CC)

Section 10(10CC): Exemption for Income Tax Paid by an Employer on Non-Monetary Perquisites

Section 10(10CC) of the Income-tax Act, 1961 provides an exemption for tax actually paid by an employer, at its option, on income in the nature of a non-monetary perquisite provided to an employee. The underlying perquisite and the tax paid on it must be distinguished.

Key distinction: The employer-paid tax on a qualifying non-monetary perquisite is exempt in the employee's hands; the perquisite itself does not become exempt merely because the employer pays its income tax.

What does Section 10(10CC) mean?

The historical provision exempts any income-tax actually paid by the employer, at the employer's option, on behalf of an employee on income in the nature of a perquisite not provided by way of monetary payment, within the meaning of Section 17(2). It prevents the qualifying employer-paid tax from being treated as an additional taxable perquisite for the employee.

The exemption is directed at the tax payment, not at the value of the original benefit. Whether the benefit itself is taxable, and its value, are determined separately under the salary and perquisite provisions and applicable rules.

Eligible assessee, income and amount exempt

Eligible taxpayer	An individual employee receiving a qualifying non-monetary perquisite whose income tax on that perquisite is paid by the employer.
Nature of exempt income	Income-tax actually paid by the employer, at its option, on behalf of the employee in respect of a qualifying non-monetary perquisite.
Relevant provisions	Section 10(10CC) read with Section 17(2), Section 192(1A) and Section 192(1B) of the Income-tax Act, 1961, as applicable to the relevant year.
Exemption amount	The entire amount of qualifying income tax actually paid by the employer; Section 10(10CC) does not prescribe a separate fixed rupee ceiling.
Important limitation	The exemption does not automatically apply to tax paid on cash salary, monetary allowances or other monetary payments.

Conditions for claiming the exemption

Employer and employee relationship: The tax must be paid by an employer on behalf of its employee.
Non-monetary perquisite: The relevant benefit must be a perquisite under Section 17(2) that is not provided by way of monetary payment.
Employer's option: The employer must choose to bear the income-tax liability on the qualifying perquisite rather than recover that amount from the employee.
Actual payment: The income tax must actually be paid by the employer. A contractual promise without payment is insufficient.
Correct payroll treatment: The underlying taxable perquisite must be valued and accounted for under the applicable provisions, with the employer-paid tax treated separately.

Definitions and connected provisions

Perquisite under Section 17(2)

A perquisite is an employment-related benefit or amenity covered by Section 17(2), subject to its statutory exclusions and valuation rules. Examples may include employer-provided accommodation, a car available for personal use or certain employer-provided facilities. The precise tax treatment depends on the benefit and the applicable valuation rules.

Non-monetary versus monetary perquisites

A non-monetary perquisite is generally a benefit provided in kind rather than a direct cash payment. A cash allowance or reimbursement is not automatically a non-monetary perquisite. The legal character of a payment must be assessed on its facts, rather than its payroll label.

Employer-paid tax and Section 192(1A)

Section 192(1A) of the 1961 Act allows an employer, at its option, to pay tax on the whole or part of the income in the nature of non-monetary perquisites, without deducting that tax from the employee's salary. Section 192(1B) provides for computation at the prescribed average rate. Section 10(10CC) addresses the employee-side exemption for that qualifying tax payment.

Illustrative calculation

Suppose an employee receives taxable salary of Rs. 12,00,000 and a taxable non-monetary housing perquisite valued at Rs. 2,00,000. The taxable value of the housing benefit remains part of salary income, subject to applicable law. If the employer elects to pay Rs. 40,000 as income tax attributable to that non-monetary perquisite, and the statutory requirements are satisfied, the Rs. 40,000 tax payment can qualify for exemption under Section 10(10CC). The example is illustrative only; actual tax is determined under the applicable rates and Section 192 computation rules.

What is not covered?

Tax paid by the employer on ordinary cash salary or cash bonuses merely because the employer agrees to bear the employee's tax burden.
A monetary allowance presented as a non-monetary benefit without supporting facts.
The underlying taxable value of a non-monetary perquisite, which must still be considered under the relevant salary provisions.
Amounts that the employer has not actually paid as income tax on the employee's behalf.

Company-law approval is a separate issue

Older explanations sometimes refer to Section 200 of the Companies Act, 1956 concerning company payments of tax on managerial remuneration. That reference should not be treated as a current standalone condition under the income-tax exemption. Corporate approvals and remuneration restrictions, where applicable, must be examined under the Companies Act, 2013 and relevant rules separately from Section 10(10CC).

Income-tax Act, 2025: applicability from 1 April 2026

The Income-tax Act, 2025 applies from 1 April 2026. Section 10(10CC) is a reference to the Income-tax Act, 1961; for tax years governed by the new Act, check the corresponding operative exemption and salary-withholding provisions, along with any transitional rules. Do not assume that the 1961 Act's section numbers remain unchanged. For earlier periods, consult the law applicable to that assessment year.

Payroll records and supporting documents

Employment agreement and the employer's written policy or election to bear tax on non-monetary perquisites.
Perquisite valuation worksheets and supporting documents for benefits provided in kind.
Salary statements, Form 16 where applicable, and tax deposit or withholding records.
Working papers showing the tax attributable to qualifying non-monetary perquisites.
Evidence that the employer actually paid the qualifying tax rather than recovering it from the employee.

Official legal references and related articles

Updated 10 October 2026. This article describes Section 10(10CC) of the Income-tax Act, 1961 and highlights the change in governing legislation from April 2026.