In this article, we will discuss the Valuation of Rent free accommodation provided by the employer [Section 17(2) & Rule 3(1)] of the Income Tax Act, 1961.
Provisions of rent free accommodation when accommodation is provided by any other employer
Category of employees:
1.Accommodation provided to Judges of Supreme Court and High Court:
| Where Accommodation is Unfurnished | Where Accommodation is Furnished |
|---|---|
| It is fully exempted. | It is fully exempted. |
2. In the case of Central or State Government Employee:
| Where Accommodation is Unfurnished | Where Accommodation is Furnished |
|---|---|
| Licence fee determined by the Central or State Government in respect of accommodation in accordance with the rules formed by that Government will be the value of perquisite. | Value of unfurnished accommodation + 10% p.a. of the cost of furniture (if such furniture is owned by the employer) + Actual hire charges paid or payable by the employer (if the furniture is taken on hire by the employer). |
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3. In the case of Non-Government Employee:
(a) When the accommodation is owned by the employer:
| Case | Where Accommodation is Unfurnished | Where Accommodation is Furnished |
|---|---|---|
| (i) If the accommodation is situated in cities having population exceeding 25 lakh as per 2001 census. | 15% of salary in respect of the period during which the accommodation is occupied by the employee during the previous year will be the value of perquisite. | Value of unfurnished accommodation + 10% p.a. of the cost of furniture (if such furniture is owned by the employer) + Actual hire charges paid or payable by the employer (if the furniture is taken on hire by the employer). |
| (ii) If the accommodation is situated in cities having population exceeding 10 lakh but not exceeding 25 lakh as per 2001 census. | 10% of salary for the period mentioned above will be the value of perquisite. | Same as above. |
| (iii) If the accommodation is situated in cities having population less than 10 lakh as per 2001 census. | 7.5% of salary for the period mentioned above will be the value of perquisite. | Same as above. |
(b) When the accommodation is taken on lease or rent by the employer
| Where Accommodation is Unfurnished | Where Accommodation is Furnished |
|---|---|
| Lower of the following sums will be the value of perquisite: (i) Actual amount of lease rent paid or payable by the employer (ii) 15% of salary | Value of unfurnished accommodation + 10% p.a. of the cost of furniture (if such furniture is owned by the employer) + Actual hire charges paid or payable by the employer (if the furniture is taken on hire by the employer). |
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