Employees living in rent-free homes may have to shell out lower taxes

IN a major relief to taxpayers using rent-free accommodation provided by the employer, the tax department has lowered the valuation of such an accommodation for the purpose of tax calculation.

- DIPAK MONDAL

The change in calculation will lead to higher take-home salary for employees living in rent-free accommodations.

A notification to this effect was issued late on Friday night. The accommodation provided to employees would now be valued at 10% of salary (lowered from 15% earlier) in cities with population exceeding 40 lakhs as per 2011 census (earlier 25 lakhs as per 2001 census), 7.5% of salary (reduced from 10%) in cities exceeding 15-40 lakh population and 5% of salary (reduced from 7.5%) in other areas. The revised computation will be effective from 1 September 2023.

The new provisions incorporate the insights from 2011 census data and aim to rationalise the perquisite value calculation.