VALUE OF PERQUISITES - PERSONAL LEASED ACCOMMODATION

Tax queries 305 views 1 replies

An employee is having personal leased accommodation with rent Rs.10000 per month. 

His eligibility for rent reimbursement from the employer (non government) is Rs.8000 only. Remaining Rs.2000 is borne by the employee.

Salary of the employee is Rs.12 lacs per annum. 

 

How will the Accommodation Perk be calculated?

As per Income Tax Rules on Value of Perquisites, where the accommodation is taken on lease or rent by the employer, actual amount of lease rental paid or payable by the employer or 15% of salary whichever is lower as reduced by the rent, if any, actually paid by the employee.

 

So what should be the accommodation perk for taxation purpose? Kindly help. 

Replies (1)

Got it, here’s how the value of perquisite for personal leased accommodation is calculated under Income Tax rules:


Given:

  • Rent paid by employer (lease rent) = Rs. 10,000/month = Rs. 1,20,000 per year

  • Eligibility for rent reimbursement = Rs. 8,000/month

  • Employee bears Rs. 2,000/month

  • Salary = Rs. 12,00,000 per annum


Tax Rule for Lease Accommodation Perquisite (Section 17(2)):

Value of perquisite =
(Actual lease rent paid by employer or 15% of salary, whichever is lower) – Rent paid by employee


Step 1: Calculate 15% of Salary

15% of Rs. 12,00,000 = Rs. 1,80,000 per annum


Step 2: Actual lease rent paid by employer

Rs. 1,20,000 per annum


Step 3: Choose lower of Step 1 and Step 2

Lower = Rs. 1,20,000


Step 4: Deduct rent paid by employee (Rs. 2,000 x 12 = Rs. 24,000)

Value of Perquisite = Rs. 1,20,000 – Rs. 24,000 = Rs. 96,000 per annum


Final: Perquisite value for accommodation = Rs. 96,000 per year


Note:

  • The eligibility for rent reimbursement (Rs. 8,000) does not directly affect perquisite calculation; only the actual lease rent paid by employer matters.

  • Employee’s contribution reduces the taxable perquisite value.

  • This Rs. 96,000 will be added to taxable salary as perquisite.


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