Rules amended to assess rent-free accommodation provided to employees by the company. Employees who are well paid and live in rent-free housing provided by the company can now save more
The Income Tax Department has changed the rules for valuing rent-free accommodation provided by the company to its employees. With this, employees who get better salary and live in rent-free accommodation provided by the company will now be able to save more. This is likely to increase the take-home pay of the employees.
The Central Board of Direct Taxes (CTBT) has issued a notification regarding amendments to the Income Tax Rules on 18 August. These rules will come into effect from 1 September. The Finance Act 2023 brought amendments for the purposes of computing ‘facility’ in respect of the value of concessional accommodation provided to an employee by his company. The rules for calculation of convenience have now been notified. The Income Tax Department said on Saturday that the classification and boundaries of cities and population has now been done on the basis of the 2011 census as against the 2001 census.
As per the amended notification, the valuation of accommodation provided by the company to private sector employees will be as follows:
In cities with a population of more than 40 lakhs, the assessment will be 10% of the pay, earlier it was 15%. And earlier the population limit was 25 lakhs.
In cities with a population between 15 lakh and 40 lakh, the assessment will be 7.5% of the pay, which was earlier 10%.
In cities with a population of less than 1.5 million, the assessment has been made 5 per cent of the pay, earlier it was 7.5 per cent. The limit of population was less than 10 lakhs.
(Population calculation as per 2011 census)
Amit Maheshwari, tax partner, AKM Global said that employees who are getting adequate salary and accommodation from the employer will be able to save more as their taxable base is going to reduce now with the revised rates.AMRG & Associates Chief Executive Officer (CEO) Gaurav Mohan said these provisions incorporate the 2011 census data and are aimed at rationalizing the perquisite value calculation.
Mohan said that the taxable salary of workers availing rent-free accommodation would come down, thereby increasing the net take-home pay. Although it will also have a twin effect, the savings of the employees will increase but the government revenue will decrease. Low-income workers with modest housing won’t benefit much from the tax relief.
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