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When employer provides employee facility of rent free accommodation. value of it is taxable as a perquisites in salary head of income tax.

For calculating perquisites value taxpayer has to follow two steps.

Step 1: find out unfurnished accommodation's value

Step 2 : find out furniture value if it is furnished house.

Value of perquisite: value of unfurnished accommodation plus value of furniture.

Perquisites value for government employees is license fee determined by government for accommodation.

Other than government employees:

When accommodation is owned by employer

Accommodation is provided where population is  

Less than 10 lakhs- 7.5% of salary

10 lakhs to 25 lakhs-10% of salary

More than 25 lakhs- 15% of salary

When accommodation is taken on lease or hire

Actual  amount of lease rent or15% of salary whichever is less

When accommodation is provided in a hotel

24%  of salary  or actual charges payable whichever is lower

Note: salary means basic + DA (if forming part of salary for retirements benefits ) + taxable allowances +bonus + commission but does not includes

DA (if not forming part of salary

exempt allowances

retirement benefits

employer's pf contribution.

When employee is transferred at some other place  and getting new accommodation at the other place retaining old accommodation, value of perquisites shall be:

- for a period not exceeding 90 days, find out the value of both accommodations and consider the one which has lower value.

- where the period exceeding 90 days, the value of perquisites will be charged for the both accomodations.


Mr Prem getting following salary and resides in Delhi  and getting rent free accomodation and house is owned by employer.

Basic pay


D.A. (not forming part of salary)




City compensatory allowance


Perquisites value will be 15% of salary (more than 25 lacks population )

Salary for perquisites purpose : basic + bonus + city compensatory allowance = 680000* 15% =102000

Suppose Mr Prem stays in rent free accomodation for which employer pays 120000. In this situation , perquisites will be 120000 or 102000 whichever is lower means 102000. If accommodation is furnished and employer is paying 20000 p.a. for furniture so we have to add that 20000 to calculate perquisites value.


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Category Income Tax   Report

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