Difference between section 17(2)(viii) and section 17(2)(iii)

These are two different kinds of perquisites under Section 17(2) of the Income-tax Act, 1961.

Section 17(2)(iii): ESOPs and sweat equity

• It covers the value of specified securities or sweat equity shares that the employer (or former employer) allots or transfers to the employee free of cost or at a concessional rate.
• The taxable perquisite is the fair market value (FMV) on the date of exercise or allotment, minus the amount the employee actually paid.
• It is taxed once, in the year of allotment or transfer, as salary income. Later sale gains are taxed separately as capital gains, with the FMV on the exercise date as the cost of acquisition.
• Eligible startups may be able to defer the TDS or tax payment, as provided in Section 192(1C).

Section 17(2)(viii): Accretion on excess employer contributions

• It covers the annual accretion (interest, dividend or other income) on the balance of employer contributions that exceed the ₹7.5 lakh annual limit under Section 17(2)(vii). Those contributions are to a recognised provident fund, an approved superannuation fund and the NPS.
• Clause (vii) taxes the excess contribution itself. Clause (viii) taxes the income that builds up on that excess each year.
• The amount is computed under Rule 9D of the Income-tax Rules, which requires a separate account for the taxable contributions.

Note: The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026, so these provisions carry different section numbers there. The 1961 Act still governs income up to FY 2025-26. If you need the exact mapping or are filing for a specific year, check the current text or ask a tax professional. I’m not a tax advisor.