Exercise:- Mr. X is working in Central government service given rent free accommodation in an government apartment at free of cost. The license fee prescribed by government is Rs.3000 but fair rental value of the house is Rs. 10,000. How much is taxable?
Answer :- Fair rent is not considered. The license fee Rs. 3,000 is taxable in the hands of Specified employee.
Value of perquisites depends on Population of the city where accommodation provided.
Exceeding population 25 lakhs Population beyond 10 lakhs-Up to25 lakhs Population Up to 10 lakhs Owned By employer 15% salary or amount paid By company To outsider Which ever Is less Rented By company Owned By employer Rented Owned By employer Rented By company 15% of salary 10% of salary 7.5% of Salary Population as per 2001 census
If house property is owned by employer depends on the population of the city percentage differs. Big city it is 15% of salary, medium city it is 10% and small city it is 7.5% of salary for accommodation with out any facility like furniture.
If house is rented by employer given to employee it is 15% of salary or rent paid by employer whichever is less taxable for specified employees irrespective of the type of city.
All Cash salary received or receivable in hand (including taxable allowances) by the employee himself.
Excludes all *perquisites and *DA which will not come under retirement purpose
If any allowance is exempted (like HRA(partly), children educational allowance up to Rs.100 Per month or transport allowance up to Rs. 800 per month etc.), to the extent exempted is not included in the meaning of salary but balance is included in the meaning of salary.
Re-imbursement of expenses in respect of car (which is owned by employee and used for personal and official purpose) (amount not taxable is up to Rs. 1,200 per month for car having engine capacity of not more than 1600cc, Rs. 1,600 per month for car of above 1600cc and Rs. 600 per month for driver).
Conveyance facility provided to High Court Judges and Supreme Court Judges.
Conveyance facility provided to an employee to cover the journey between office and residence.
The valuation of rent free accommodation shall be 15% of the salary i.e. 15% of (248000+ 16000+30000+15000+16000+25000+12000)=Rs 54,300
Note: Salary shall be taken on basis for the period for which accommodation has been provided. Hence advance salary for 2008-09 shall not be taken in account.
Employer’s contribution does not come to the assessee in cash as it is paid directly to the department. That is why I have mentioned the meaning of salary is cash salary received by the assessee himself.
Value of free rent accommodation : sri Mohan is purchase manager of a private company and for previous year 2007-08 he received the following emoluments-
Basic Salary 120000
Dearness allowance(50% forming part of salary) 60000
Project allowance 15000
Commission on purchase 16000
City compensatory allowance 25000
Medical allowance 12000
Employer contribution to recognized provision fund 20000
Salary pertaining the year 2008-09 has been received in advance 20000
He is also in part employment with B ltd and is receiving salary of Rs 80000 P.A. he has been provided with a rent free accommodation in Mysore owned by the employer. The population of Mysore may be assumed to be 15 lakhs as per 2001 census. Determine taxable salary