I-T dept notifies changes in rules valuing rent-free stay

As per the notification, where unfurnished accommodation is provided to employees and such accommodation is owned by the employer, then the valuation would be 10 per cent of salary as against 15 per cent now in cities having a population exceeding 4 million as per 2011 Census (earlier, 2.5 million as per 2001 census).

Such valuation would be lowered to 7.5 per cent of salary from 10 per cent now in cities, having a population exceeding 1.5 million but not exceeding 4 million as per 2011 census (earlier, 1 to 2.5 million as per 2001 census).
As a result, the lower value of perquisite would be added to the beneficiary-employee’s cost to the company (CTC) and taxed as per her income bracket, and the tax regime opted for. It would lead to lower tax outgo and more take-home salary.

“This is a good move. Employees in leadership positions or in top management as well as employees who have substantial salaries and receive accommodation from the employer will be able to save more since their taxable base is going to be reduced now with the revised rates,” Amit Maheshwari, tax partner, AKM Global, a tax and consulting firm, said.

“The perquisite value shall be lower resulting in a relief to them in the form of take-home pay,” Maheshwari added.
Perquisites are considered a very important element of income from salary. One of the important perquisites given to employees is rent-free accommodation to give additional comfort to staff to retain talent and increase productivity.