Allowances and Perquisites

Basis of Difference	Allowances	Perquisites
Meaning	Fixed amount of money paid by employer to employee for meeting his/her certain expenses on regular basis.	Benefits or facilities in form of incentive provided by employer to employee in addition to salary or wages is perk.
Nature	It is a monetary payment or benefit given by employer.	It is generally as non-monetary benefit (though sometimes convertible into money or also given in money terms).
Purpose	To compensate expenses of employee in relation to job or personal life.	To provide extra benefits, comforts or facilities to employees.
Examples	HRA (House Rent Allowance), DA (Dearness Allowance), TA (Transport Allowance), Medical Allowance, etc.	Rent-free accommodation, free car, concessional loans, free electricity, gas, or servants.
Taxability	Some allowances are fully taxable (e.g., DA), some partially exempt (e.g., HRA in old regime)	Some perquisites are taxable, some fully exempt, depending on their nature (e.g., medical facility in company hospital exempt).
Received in Form	Always received in cash or salary form.	Usually received in kind or facility form.
Who gets it	Generally given to all employees in same category.	Usually given to selected employees or managerial staff.
Control	Control in hands of employee regarding spending the amount whether fully or less.	Facility or benefit is controlled or provided by employer.

MIS NOTES – Meaning, Types, Components and Objectives