Rfa accomadation to consultants

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 April 2014 Dear Experts,

What is the TDS liability on employer in following situation.

Profession Charges to Consultant : 50,000
Rent paid by company to land lord towards employee Rent free accommodation : 20,000

Now company deducting TDS on 50 k @ 10% u/s 194 J. TDS @ 10% on rent paid to land lord under 194I.

Now is there any liability on company to calculate perquisite for employee and deduct TDS.

Regards

Rupesh Jain

Rupesh Jain (Expert)
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11 April 2014 if company give salary a employee excess exemption limit then you have to deduct tds on salary of that employee

and add the perquisite amount in salary of employee.

Querist : Anonymous

Querist : Anonymous (Querist)

15 April 2014 Hi Rupesh : Thanks for your reply.

My question is :

In above case value of perquisite is 15% of salary or actual RFA which ever is less i.e 2.4 lacs.

As company paying rent directly to landlord TDS deducted and paid i.e 18k to land lord and 2k to GOV u/s 194 I.

Now my question as follows:
a) is it required by company to add 2.4 lacs in taxable salary of employees?

b) As employee recruited as consultant TDS to be deducted @ 10 or as per salary.

c) Is it acceptable to deduct TDS on both for landlord payments and in the hands of employee .

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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22 July 2025 Great question! Let me break down the TDS and perquisite treatment here clearly:

Facts:
Consultant fees paid: ₹50,000
Company pays rent ₹20,000/month (₹2.4 lakhs/year) directly to landlord as Rent Free Accommodation (RFA) to the consultant
Company deducts:
TDS @ 10% on ₹50,000 under Section 194J (professional fees)
TDS @ 10% on ₹20,000 monthly rent paid to landlord under Section 194I
Your questions and answers:
(a) Is it required by the company to add ₹2.4 lakhs (value of RFA) in taxable salary of the employee (consultant)?

If the consultant is treated as an employee:
The rent paid by the company is a perquisite under Salary Income, so yes, the company should add the value of RFA (₹2.4 lakhs or 15% of salary, whichever is less) to the consultant's taxable salary.
If the consultant is truly an independent contractor:
There is no salary, so no perquisite concept applies here. The rent paid by the company to landlord is not treated as a perquisite to the consultant but could be considered a business expense or possibly a payment to a third party.
Key: The nature of the relationship (employee or consultant) is critical here.
(b) For TDS, is it 10% (on professional fees) or as per salary?

For a consultant (independent contractor) fees, TDS under Section 194J @ 10% applies on fees.
For an employee, TDS on salary is calculated as per applicable income tax slab rates using Form 16 or similar mechanisms.
(c) Is it acceptable to deduct TDS both on rent paid to landlord (under 194I) and on professional fees paid to consultant (under 194J)?

Yes, this is correct and mandatory.
The company pays rent directly to landlord → deduct TDS @ 10% under Section 194I (rent payment).
The company pays fees to consultant → deduct TDS under Section 194J (professional fees).
These are two separate payments with separate TDS provisions.

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