Starting from September 1, significant changes are in store for employees who enjoy rent-free accommodation provided by their employers.
The Income Tax Department has introduced new regulations governing how such homes are valued, which will lead to increased savings and higher cash salaries for employees.
Key Highlights
Effective Date: The Central Board of Direct Taxes (CBDT) has revised the Income Tax rules, and these changes will be in effect from September 1.
Valuation of Rent-Free Homes
Under the updated rules, if an employer-owned unfurnished home is given to employees (excluding central and state government employees), the valuation criteria will vary based on the city’s population.
For cities with a population of over 40 lakhs as per the 2011 census, the valuation will be 10% of the salary (previously under 15%).
This update replaces the previous rule, which was applicable to cities with a population exceeding 25 lakhs according to the 2001 census.
Increased Savings for Employees
Industry experts have applauded these changes for their potential to boost savings among employees.
AKM Global Tax Partner, Amit Maheshwari, highlighted that employees earning substantial salaries and benefiting from employer-provided homes will see a reduction in their taxable base due to the revised rates.
This reduction will ultimately result in more significant savings for employees.
Rationalizing Perquisite Value Calculation
Gaurav Mohan, CEO of AMRG & Associates, noted that the new regulations incorporate data from the 2011 census and aim to streamline the calculation of perquisite values.
As a result, employees enjoying rent-free accommodation will experience a decrease in their taxable salary, leading to a higher net take-home salary.
