Rent Free Accommodation: Computation & Taxability

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Employers usually provide several facilities to their employees one of which is Accommodation for Residence of the Employee.
Sometimes, this accommodation is given to the employee without any charge and in some cases a nominal rent is received from
the employee.

Such facilities which are given not in cash but in kind by the employer are referred to as Perquisites. If these facilities were not
given by the employer, the employee would have incurred expenditure for such facilities from his own pocket.
And therefore, such perquisites (facilities) are considered as additional benefits arising to the employee from his employment and loansCA

Such additional facilities are added to the salary income of the employee as Perquisites in the Income Tax Return and chargeable

to Tax as per Income Tax Slab Rates.

INCOME TAX ON ACCOMMODATION GIVEN BY THE GOVT.
If any accommodation is given by the Central or the State Govt to its employees, income tax would be levied in the manner

specified below.

Treatment in case of Unfurnished Accommodation

License Fee determined by Central or State Govt xxx

(Less) Rent paid by the Employee (xxx)

(=) Taxable value of perquisite for Unfurnished Accommodation xxx

Treatment in case of Furnished Accommodation

License Fee determined by Central or State Govt xxx

Lease Charges of Furniture in case of Leased Furniture or 10% Depreciation on Furniture in case it is owned
(Add) by Employer xxx
(Less)Rent paid by the Employee (xxx)

(=) Taxable value of perquisite of Furnished Accommodation xxx

CAloans
INCOME TAX ON RENT FREE/ CONCESSIONAL ACCOMMODATION GIVEN BY NON GOVT
In case the employer is not Central or State Govt., the income tax on Rent Free/ Concessional Rate of Accommodation would be
In case of Unfurnished Accommodation

Pre-approved
levied in the manner specified below:-
 In case of Unfurnished Accommodation, it should first be ascertained whether the accommodation is owned by the employer or the

employer has taken the accommodation on lease.

In case Unfurnished Owned Accommodation is provided by the Employer

Population exceeds 10 Lakh but less

Population exceeds 25 Lakhs Population is less than 10 Lakh
than 25 Lakh
15% of Salary 10% of Salary 7.5% of Salary
(Less) Rent paid by Employee (Less) Rent paid by Employee (Less) Rent paid by Employee

MEANING OF SALARY FOR THE PURPOSE OF COMPUTATION OF TAXABLE VALUE

Salary includes pay, allowance, bonus, commission or any other monetary payment by whatever name called but does include:-
1. Dearness Allowance or Dearness Pay unless it enters into the computation of Superannuation or Retirement Benefits of the
Employee
2. Employers Contribution to the Provident Fund Account of the Employee
3. Allowance which are exempted from the payment of Tax
4. Value of Perquisites specified in Section 17(2)

Other Relevant Points

1. Furniture includes TV, Radio, Refrigerator, AC, Other Gadgets etc