A new rule, effective today, brings welcome news for millions of employed individuals across the country.
The Income Tax Department has implemented a rule that will positively impact the take-home pay of salaried workers. The recent alteration pertains to the assessment of rent-free accommodation.
Enhanced Take-Home Salaries
The Income Tax Department has revised the rules regarding the valuation of rent-free housing provided to employees.
This change particularly benefits individuals with substantial salaries who reside in accommodations provided by their employers.
Consequently, their take-home salaries will see an increase.
The Central Board of Direct Taxes (CBDT) has officially enacted this new rule, which took effect on September 1st.
Notification Highlights
As per the CBDT notification, employees, excluding those working for the Central or State Government, will have their housing valued based on the following criteria:
In cities with a population exceeding 40 lakhs, according to the 2011 census, the valuation will be 10 percent (previously less than 15 percent). Previously, this rule applied to cities with populations exceeding 25 lakhs, according to the 2001 census.
Boost in Savings
Under the new rule
Cities with populations exceeding 15 lakhs but less than 40 lakhs in the 2011 census will see a valuation of 7.5 percent (previously less than 10 percent).
Previously, this category encompassed cities with populations exceeding 10 lakhs but less than 25 lakhs, according to the 2001 census.
Amit Maheshwari, Tax Partner at AKM Global, explained that employees receiving substantial salaries along with employer-provided accommodations will experience greater savings.
Their taxable income will decrease due to the revised rates.
The government’s inclusion of 2011 census data in these changes will reduce the taxable income of employees benefiting from rent-free housing, ultimately resulting in increased take-home pay.
