Perquisites are considered as a very important element of Income from Salary. One of the important perquisites given to employees is Rent-free Accommodation (RFA). It means a place of residence which the employer gives to an employee to stay in. RFA can be given either free of cost or at a concessional rate. The term accommodation shall include:
For the purpose of computation of tax, employees are divided in the following two categories:
|Value of Unfurnished accommodation||XXXX|
|Plus: 10% p.a of cost of furniture, if the furniture is owned by the employer or actual rent of furniture.||XXXX|
License fee of House determined will be taxable.
|City population as per 2001 census||% of Salary Taxable|
|Up to 10 lakhs||7.5%|
|Exceeding 10 lakhs but up to 25 lakhs||10%|
|Exceeding 25 lakhs||15%|
|Actual lease rent paid by the employer||XXXX|
|15% of Salary||XXXX|
|Whichever is less will be taxable||XXXX|
Very often employer provides accommodation in a hotel to the employee (whether Government or non-Government). For the purpose of income tax, hotel accommodation provided to an employee in a hotel will be valued as under:
|Accommodation is unfurnished||Accommodation is furnished|
|It is not taxable||
– The actual Charges paid/ payable to such hotel; or
Whichever is less will be taxable
Salary for purpose of Taxability of Rent free accommodation shall include = Basic pay+ Dearness Allowance/pay (if forms part of superannuation or retirement benefits) + Bonus + Commission + Fees + All taxable allowances + All monetary payments chargeable to tax, from one or more employers.
House Rent Allowance is an Allowance that an employee gets from his or her employer for fulfilling the rental expenses of their house. RFA is accommodation which covers house or property provided by the employer for the residential purpose of the employee.
The value of perquisite in respect of accommodation provided to government employees is equal to the license fee which would have been determined by the Central or State Government in accordance with the rules framed by the Government for allotment of houses to its officers.