Flat given to employees

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This discussion explores the tax implications of providing flats to employees. It covers how to calculate taxable benefits (perquisites) for free accommodation during employment, based on local rental rates. It also addresses the tax treatment when the flat is gifted to the employee after 10 years, and whether the employer can claim depreciation on the property.

M.M.SURANA

M.M.SURANA (Querist)

01 July 2021 Dear Expert, As one of my client purchase flats for their employee and term & condition of employment is employees can stat in that flats and those employees who will in continuation of job will get for 10 yrs. will be give the flat at free of cost after 10 yrs. My queries are as follows :
1. How to calculate perq till they are in employment at what basis for free accomdation.
2. After 10 yrs. if flat will be given to employee, what will be treatment in the hands of employees will be treated as capital Receipt or Revenue and same way for employer, any capital gain will attract.
3. can employer claim depreciation on flat, since all above are in terms of employment.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 July 2021 1 Calculate perq based on rental rates prevailing in that location.
2 lt will be considered as gift to employees(value considered for stamp duty) and added to salary of the employees and taxed.
3 Depreciation can be claimed.

M.M.SURANA

M.M.SURANA (Querist)

02 July 2021 Any capital Gain for empolyer? instead of gift as I feel can be taken as perq, since it is in term of employment.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 July 2021 It will fall under gift only as property transferred without adequate consideration.
Capital gains to employer will not arise as it's given as gift.

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