This document discusses rent free accommodation provided by employers and its taxation. It defines rent free accommodation and provides rules for valuation of unfurnished, furnished and accommodation provided at concessional rent. For unfurnished accommodation, taxable value is a percentage of salary based on city population size. Furnished accommodation value includes furniture costs. Concessional rent value is the difference between market rent and amount paid. Exceptions for certain government employees are also outlined.

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.