However, these expenses are often incurred to entertain customers and clients for the purposes of business. Therefore, where such expenses on entertainment including meals are for purposes of business and proper records for the same are maintained no perquisite would arise.

Club expenses of employees borne by employers are charged as perquisite in terms of section 17(2)(iv). It has been specifically provided in the rules that annual and periodical club fees paid by the employer will be chargeable as perquisite. However, to ensure that basic facilities for the health and recreation of employees are not hit, health clubs, sports facilities, etc., provided uniformly to all classes of employees by the employer at the employer’s premises are exempt. The initial one time deposit or fees for corporate or institutional membership, where the benefit does not remain with the employee after cessation of employment, are exempt. Where such expenses on entertainment including meals are for purposes of business and proper records for the same are maintained no perquisite would arise.

The following documentation needs to be maintained by the employer in order to render the credit card and club expenditure exempt :

(a)  complete details in respect of such expenditure including the date of expenditure and the nature of expenditure;

(b)  a certificate by employer to the employee to the effect that the same was incurred wholly and exclusively for the performance of official duties.