Rent free accomodation

1. Rent Free Accomodation
Dr.P.Ravichandran,
M.Com., M.B.A., M.A (Astrology).,
M.Phil., Ph.D., D.C.P., D.L.L & A.L.,
P.G.D.C.A., P.G.D.P.M & I.R.,
Associate Professor of Commerce,
S.B.K. College,
Aruppukottai – 626101.
E-mail id: prcapk@gmail.com
9443424090 & 9080030090

2. ACCOMODATION
Accommodation shall include a –
House;
Farm-house;
Flat;
Hotel accommodation;
Guest house;
Caravan;
Mobile home;
Ship etc.

3. Rent Free Accommodation
(Sec 17 (2)(i) )
Central / State
Govt. Employees
Other than
Govt. Employees
Rent as per
Govt. Rules
Accommodation
Owned by
Employer
Accommodation is
taken on
Lease/Rent by
Employer
Population of
City,
upto 10 Lacs
Taxable Value,
7.5% of Salary
Population of City,
Between
10 Lacs to 25 Lacs
Taxable Value,
10% of Salary
Population of
City,
above 25 Lacs
Taxable Value,
15% of Salary
Perquisite is
Lower of below
a) 15% of
Salary
b) Rent paid by
employer
Valuation of Unfurnished Rent Free Accommodation

4. Valuation of Furnished House
 If furniture is provided then –
if owned – 10% of cost of furniture (or)
if taken on rent – actual hire charges
shall be added with unfurnished house.
Any rent collected by employer from
employee, such amount is deductible
from taxable perquisite.

5. Salary for RFA
• Here, Salary means 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
• Note: Salary shall be taken on basis for the period
for which accommodation has been
provided. Hence advance salary if any
shall not be taken into 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.

6. Salary = Basic salary
+ DA, (if terms of employment so provide)
+ Bonus (Current year)
+ Commission
+ taxable portion of all allowances
+ Any monetary payments which is chargeable
[ but not to include perquisites u/s 17(2) ]

7. House provided at concessional rent
[ Sec.17(2)(ii) ]
Means employer has given a house to his employee for
which he is charging a part of rent .
Value of unfurnished house xxxxx
Add: 10% p.a. of cost of furniture (or)
Actual hire charges xxxx
xxxxx
Less: Amount paid by the employee xxxx
Value of house at concessional rent xxxxx

8. • Taxable value of perquisite =
 24% of salary paid or payable only for the period of
accommodation provided; (or)
 Actual charges paid or payable by the employer to such hotel.
Whichever is lower
• Note:- 1. If period of stay is more than 15 days, the first 15
days is not taxable and the remaining 15 days is
taxable (38 – 15 = 23days);
2. If some part is paid by employee, that will be deducted.
Valuation of Hotel Accommodation
• Where the hotel accommodation (motels, guest houses etc.) is
provided only
 on his transfer from one place to another place; and
 the period of stay is more than 15 days.

9. Rent Free Accommodation when NOT chargeable
[ Rule 3(1) ]
 The value of perquisite shall be NIL in case of
* Judges of High Courts.
* Judges of Supreme Courts.
* Union Ministers.
* Opposition Leader.
* Officials in Parliament.
* Where the temporary accommodation is provided to an
employee working in mining site or project
execution site or a dam site or power generating
site or offshore site or remote area.

10. Valuation of Furnished House
 If the furniture is provided then –
if owned – 10% of cost of furniture (or)
if taken on rent – actual hire charges
shall be added with unfurnished house.
 Here, Salary means
Salary = Basic salary
+ DA, (if terms of employment so provide)
+ Bonus (Current year)
+ Commission
+ taxable portion of all allowances
+ Any monetary payments which is chargeable
[ but not to include perquisites u/s 17(2) ]
 Rent Actually paid by employee will be reduced from the
perquisite.

11. PERQUISITES
 Perquisites may be defined as benefits attached to an office
or position in addition to Salary or Wages.
 Perquisites may be provided in cash or in kind.
 Perquisites are included in salary only if they are received by
an employee from his employer ( may be former, present or
prospective.)
 Perquisites received from a person other than employer, are
taxable under the head “PGBP” or “IOS”.
 A benefit or advantage would be taxable as perquisites only if
it has legal origin.
 As unauthorised advantage taken by an employee, without
employer’s authority would create a legal obligation to
restore such advantage, it would not amount to perquisite
taxable under the Act.

12. TYPES OF PERKS
Taxable in
specified
cases
Exempted
Perks
(Tax-free perks)
Taxable
Perks

13. EXEMPTED FROM TAX
Tax-free perks
Free medical facilities or reimbursement of medical
expenditure;
Free refreshment supplied at work place;
Free meals given at remote area or offshore;
Free recreational facilities;
Provision for telephone including mobile phones;
Education in employer’s institution - exempt upto
` 1000 p.m. per child;
Cost of refresher course;
Any rent free residential;
Goods sold by employer to employee;
Contd…

14.  Free ration received by employees;
 Perquisites to Govt. employees posted abroad;
 Rent free house given to officers of Parliament.
 Conveyance facilities to judges;
 Any amount contributed by employee towards pension;
 Computers, laptops given to employee for personal use;
 Transfer of movable assets – after using 10 years or more;
 Accident insurance premium;
 Interest-free (or) concessional loan (not > ` 20,000);
 Periodicals and journals for discharge of work;
 Leave Travel Concession (LTC).

15. Perks taxable in all cases
Rent free accommodation;
Concession rent of accommodation;
Obligation of employee met by employer – (PT, IT)
Domestic servants engaged by employee and salary
paid by employer;
Gas, electricity and water bills paid by employer;
Any bills in the name of employee for personal
expenses paid by employer;
Gift or gift voucher exceeds ` 5,000;
Lunch or dinner provided – if cost per meal > ` 50.

16. Perks taxable in specified cases
Specified employees mean,
a) Director employee, (or)
b) Employees having 20% or more voting rights in
employer company, (or)
c) Employees monetary salary is more than `50,000/- p.a.
[ Here, salary means all taxable benefit after
deduction u/s 16(ii) and 16(iii) ]
However, now-a-days, this classification does not have
much practical utility, because of Salary norms of `
50,000/- p.a.
Specified Employees-[ u/s 17(2)(iii) ]

17. -: Specified Employees :-
[u/s 17(2)(iii) ]
 Specified employees mean,
a) Director employee, or
b) Employees having 20% or more voting rights in employer company, or
c) Employee having salary more than Rs.50,000/- p.a.
( Here, salary means all taxable benefit after deduction
u/s 16)
Notes :
1) Certain Perquisites are taxable in the hands of ALL employees
2) Certain Perquisites are taxable in the hands of Specified employees only.
3) Any employee, other than a specified employee, is a “non-specified
employee”.
4) However, now-a-days, this classification does not have much practical
utility, because of Salary norms of Rs.50000/- p.a.