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Rent free accommodation income tax liability
income tax liability to the employee having rent free accommodation at power projects from the state power corporation fully owned by state government.
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| Rent-free accommodation (RFA) is a perquisite under Section 17(2) of the IT Act. Here is the complete tax treatment: 1. Taxability: RFA provided by an employer to an employee is a taxable perquisite — included in 'Salary' and taxed at applicable slab rates. 2. Valuation of RFA Perquisite (Rule 3 of IT Rules): a) Government Employees: Value of RFA = License fee charged by the government for similar accommodation (typically very low) b) Other Employees (Private Sector): - If accommodation is OWNED by employer: → In cities with population above 25 lakh: 15% of salary → In cities with population 10-25 lakh: 10% of salary → In cities below 10 lakh: 7.5% of salary - If accommodation is LEASED/RENTED by employer and provided to employee: → Perquisite value = LOWER of (actual rent paid by employer) OR (15%/10%/7.5% of salary as above) 3. 'Salary' for this purpose: Basic + DA + bonus + commission + all monetary allowances (excluding HRA and retirement benefits) 4. Furnished Accommodation: Additional 10% of cost of furniture per annum (or actual hire charges if rented) is added to the perquisite value 5. TDS: Employer must include the RFA perquisite in the employee's salary and deduct TDS accordingly in Form 16 6. Employee's ITR: The perquisite value (as shown in Form 16) is included in 'Salary Income' in the employee's ITR — no separate disclosure needed beyond what Form 16 shows 7. Directors: RFA for a director (who is not an employee but a whole-time director) is also a perquisite — same rules apply |
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