Rent free accomdation(rfa) and tax liability

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CA Aditya (Querist)
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19 April 2014 We as Pvt company recruited a consultant and among others perks, provided a RFA worth of 30k.
Company is directly paying 27k rent to land lord after deducting TDS @10% on 30k.

Now company is supposed to deduct the TDS in the hands of consultant also uner 194J . Perquisite value of RFS is Rs 2.4 lacs (1.e 15% of salary or RFA whichever is less) Regards.

Should company deduct TDS @ 10% on above perk ??

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
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19 April 2014 Its a perk and is taxable as salary u need to deduct tax under section 192.
Perquisite is a part of salary income.

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CA Aditya

CA Aditya (Querist)
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21 April 2014 Thanks Manoj.

Now is it mean Consultant is to be taxed u/s 192 on RFA( as salary income) and his other remuneration( Approx 60 K towards consultancy fees) taxed under 194 J?

Since in above case of RFA is employee eligible for basis exemption of 2 lacs??

Regards

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2025 Great question! Let me clarify the tax implications of Rent Free Accommodation (RFA) given as a perk to a consultant in India:

Key facts you shared:
Consultant receives RFA worth Rs 30,000 per month.

Company pays Rs 27,000 rent directly to landlord (after deducting TDS @ 10% on Rs 30,000).

Perquisite value of RFA is Rs 2.4 lakhs (calculated as 15% of salary or RFA whichever is less).

Query: Should company deduct TDS @10% on the perquisite (RFA)?

Tax Treatment & TDS Deduction:
Is RFA taxable as salary or professional fees?

Since the consultant is a Pvt company’s consultant, not a salaried employee, the treatment depends on the nature of engagement.

However, if the consultant is treated as an employee (permanent or contractual), then perquisite is part of salary income and tax is deducted under Section 192 (TDS on salary).

If the consultant is a professional (independent), then fees paid is taxable as professional fees and tax is deducted under Section 194J (TDS on professional fees).

Usually, if RFA is given as a perquisite for employment, it is part of salary income.

In your case:

If consultant is considered an employee, company should deduct TDS on RFA perquisite under Section 192.

If consultant is an independent professional, professional fees (60k) are subject to TDS under Section 194J but RFA perquisite may not be part of professional fees.

As you mentioned, company is already deducting TDS @10% on Rs 30,000 rent (under 194J?), but that may not be fully correct if RFA is a perquisite.

Exemption for salary income (Section 192):

Consultant’s salary income (including perquisites like RFA) is taxable.

The basic exemption limit (e.g. Rs 2 lakhs for individual) applies to total income, including salary and other income.

If the consultant is treated as an employee, the total salary including RFA perquisite is considered.

If the consultant is not an employee but an independent consultant, then exemption is on total income, but salary rules (including 192) do not apply.

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