In the recent amendment by the Income Tax Department, the Income Tax for the employees staying in free accommodation by employers will be exempt from tax.
New income tax rules for these salaried taxpayers: The income tax department has announced major relief to taxpayers, availing company-provided rent-free homes. It has lowered the tax for employees staying in such accommodations. The new rule comes into effect from today, September 1, 2023.
Income tax rules for company-provided rent-free homes
1)10 percent of salary in cities having a population exceeding 40 lakh as per the 2011 census.
2)7.5 percent of salary in cities having a population exceeding 15 lakh but not exceeding 40 lakh as per the 2011 census.
What is perquisite?
The value of rent-free provided to an employee by the employer is taxable as prerequisite.
What is RFA?
“Rent-free accommodation is a perquisite given to employees by the employer where an employee gets a place to live from their employer without paying much or anything at all. It’s a work-related benefit that’s part of the employee’s income and is taxed under ‘Salaries’,” said Abhishek Soni, CEO and Co-founder Tax2win
How new income tax rules will impact the Employee?
The taxable value of rent-free accommodation will be reduced which means employees will pay less tax resulting in an increase in their take-home salary.
“Employees who stay in accommodation, owned/rented by the employers, rent-free, could see a drop in the taxable perquisite value thereby reducing the tax burden. Which would enable them to get a bit more money in their hand,” said Archit Gupta, Founder, and CEO, of Clear.
“Starting from 1st September, under the new amendments, employees who are provided with unfurnished rent-free accommodation from non-government sources will get a reduction in the valuation of such houses i.e., their taxable base is going to be reduced now with the revised rates,” said Abhishek Soni.
These taxpayers will benefit from this rule change
As per CBDT’s notification, the changes are expected to particularly benefit high-earning individuals who receive employer-provided housing perks.
Will you benefit?
Tax and investment expert Balwant Jain said that the employer has to see the calculation of “perquisite” with regard to the value of rent-free. On who will be impacted by this change, he added that ‘rent-free accommodation is provided by only a handful of employers.’ He further added that its direct effect will be visible on employees’ salaries. “Due to less tax, the salary received in hand will be more,” said Jain.
The Central Board of Direct Taxes (CBDT) has notified amendments to the Income Tax Rules for valuing perquisites of rent-free or concessional accommodation by employers to employees.
The Finance Act, of 2023, had brought in an amendment for the purposes of calculation of ‘perquisite’ with regard to the value of rent-free or concessional accommodation provided to an employee, by his employer.
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Courtesy: Livemint