If an employer provides rent-free accommodation to its employees, certain percentage of its value is taxable in the hands of employee as a ‘perquisite’ under the head ‘income from salaries’ as per the Income-tax Act, 1961. The value of taxable perquisite for this purpose is determined as per Rule 3 of Income-tax Rules, commonly known as ‘perquisite valuation rules’.
The Finance Act, 2023 brought in an amendment in the perquisite valuation rules with regard to the value of rent-free or concessional accommodation provided by an employer to an employee, for the purpose of introducing uniformity / consistency.
The categorization and the limits of cities and population have now been based on the 2011 census as against the 2001 census earlier. Also, the rates of perquisite valuation have been reduced as below.
|
Previous Categorization and Rates |
New Categorization and Rates (effective from September 1, 2023 onwards) |
||
|
Population |
Perquisite Rate |
Population |
Perquisite Rate |
|
More than 25 Lakh |
15% |
More than 40 Lakh |
10% |
|
10 Lakh to 25 Lakh |
10% |
15 Lakh to 40 Lakh |
7.5% |
|
Less than 10 Lakh |
7.5% |
Less than 15 Lakh |
5% |
This is a welcome move by the Central Board of Direct Taxes (CBDT), as it reduces the tax liability of high-salaried individuals and expatriates who are commonly granted rent-free or concessional accommodation by their employers.
Please Click Here to read Notification no. 65 dated 18 August 2023, issued by the CBDT.
Article has been contributed by Mr. Manan Agarwal
CAclubindia
