Perquisites are benefits beyond salary - company car, accommodation, ESOP gains, interest-free loans, club memberships. Tax law assigns a perquisite value to many of these, which is added to taxable income. Not all perks are taxable (some are exempt or concessional), so structuring them well is part of smart compensation design.
In India
Perquisite valuation rules are detailed and specific (car, accommodation, ESOPs each have their own method). Payroll and finance must value them correctly for accurate TDS and Form 16.
In practice
An employee gets company accommodation. Its perquisite value (per the prescribed formula) is ₹1.2 L for the year; that ₹1.2 L is added to taxable salary even though no cash changed hands.