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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 I
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FAQ :
A 'perquisite' is a taxable benefit provided by an employer to an employee, such as rent-free accommodation, where a certain percentage of its value is added to the employee's taxable income.
The rules now use the 2011 census for population categories and have reduced the percentage rates for calculating the taxable value of rent-free or concessional accommodation.
The new rules are effective from September 1, 2023.
For cities with over 40 lakh population, the rate reduced from 15% to 10%. For cities between 15 lakh and 40 lakh, it dropped from 10% to 7.5%. For cities with less than 15 lakh population, the rate decreased from 7.5% to 5%.
High-salaried individuals and expatriates who are commonly provided with rent-free or concessional accommodation by their employers are expected to benefit from these changes.
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