Quick Summary
The Finance Act, 2023 brought in an amendment for the purposes of calculation of perquisite with regard to the value of rent-free or concessional accommodation provided to an employee, by his employer. Accordingly, CBDT has modified Rule 3 of the Income-tax Rules, 1961 to provide for the same. The categorisation and the limits of cities and population have now been based on the 2011 census as against the 2001 census earlier. The revised limits of population are 40 lakh in place of 25 lakh and
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FAQ :
The CBDT has notified a new rule (Rule 3 of the Income-tax Rules, 1961) for determining the value of perquisite in respect of residential accommodation provided by an employer to an employee.
The main changes involve using the 2011 census for population categorisation of cities and reducing the perquisite tax rates for employees receiving rent-free or concessional accommodation.
The population limits have been revised based on the 2011 census. Cities with over 40 lakh population (previously over 25 lakh) are now in the highest category, and those between 15 lakh and 40 lakh (previously between 10 lakh and 25 lakh) are in the middle category.
Yes, the perquisite tax rates have been reduced. They are now 10% (previously 15%), 7.5% (previously 10%), and 5% (previously 7.5%) of the employee's salary, depending on the city's population category.
Yes, the rule has been rationalised to compute a fair tax implication when an employee occupies the same accommodation for more than one previous year.
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