More Saving for employees as Government changes Rent Free Accommodation Valuation rule

Last Updated on August 20, 2023 by Brajesh

More Saving for employees as Government changes Rent Free Accommodation Valuation rule effective 1st September 2023.

Any employees receiving rent free accommodation from their employer will be liable to pay tax according to the valuation rule under Income Tax 1961.

Changes made in Rent Free Accommodation (RFA) Rule

A big change is made in Income Tax Act 1961, employee getting rent free accommodation from their employer will enjoy a higher take home salary after this latest amendment announced today i.e. 19th August 2023 by Central Board of Direct Taxes (CBDT). This change in Rent Free Accommodation rule is going to benefit those set of employees who were drawing high salary or whose salary is in higher range and were also getting Rent Free Accommodation from their employer.

Actually Income Tax department has made change in valuation norms for Rent Free Accommodation provided by the employer. This has been done due to Cost Price Index (CPI) i.e. keeping into account the impact of Inflation.

New Rent Free Accommodation Valuation rule

For Non Government Employees :-

Population > 40 Lakhs = RFA rate reduce to 10% from 15% earlier.

Population > 15 Lakhs = RFA rate reduce to 7.5% from 10% earlier.

Others                          = RFA rate should be 5%

Note :- For Furnished accommodation (like AC, TV, Fridge etc.) an additional 10% of actual cost of amenities is added to perquisite.

Impact on Net Take Home salary of the employee

It is expected that the employees net take home salary will increase due to change in valuation norms because of reduction in valuation rates for rent free accommodation. The new valuation rule will reduce the taxable Income of the employee which subsequently have a positive impact on the net take home salary for employees availing Rent Free Accommodation.

Company provides Rent Free Accommodation to its employees depending on his position/designation and generally employees at higher rank were provided with this facilities of RFA, hence it is going to have a positive impact on their salary.

Frequently Asked Question (FAQ)

Rent Free Accommodation new rule

It will be effective from 1st September 2023
yes Net take home salary will increase for employees availing Rent Free Accommodation
For Population above 40 Lakhs, RFA value will be 10%, whereas for population above 15 Lakh it will be 7.5%. For other valuation will be 5%

 

Earlier Rent Free Accommodation Rule

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