In a positive move for salaried employees, the Income Tax department has announced revisions to the valuation norms for rent-free accommodation provided by employer to the employee. According to a PTI report, the new changes will come into effect from September 1, and will in all probability increase take home salaries for eligible employees.
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The amendments to the Income Tax Rules have been notified by the Central Board of Direct Taxes. The changes have been made in the valuation of unfurnished accommodations that are owned by employers and offered to employees outside the central or state government sector.
So, lets have a look the the new changes.
From now on, in cities with a population exceeding 40 lakh (as per the 2011 census), the valuation will be 10 per cent of the salary, reduced from the earlier 15 per cent.
On the other hand in cities with a population exceeding 15 lakh but not surpassing the 40 lakh mark, the valuation will be 7.5 per cent of the salary, down from the previous 10 per cent.
So, with this amendment, employees with significant salaries and employer provided accommodations will be beneficial.
“The perquisite value shall be lower resulting in relief to them in the form of take-home pay,” said Amit Maheswari, Tax Partner at AKM Global to PTI.
On the other hand, Gaurav Mohan, CEO of AMRG & Associates, emphasized that these changes align with the insights from the 2011 census data and the aim is to streamline the calculation of perquisite value.
“Employees enjoying rent-free accommodation would see rationalisation of perquisite value leading to a reduction in taxable salary, increasing the net take-home pay,” he said.
“While the reduction will generate tangible savings for employees, it will also mean a corresponding decrease in government revenue,” he added.
He further said that the move will disproportionately benefit higher income employees who receive more expensive accommodations. On the other hand, lower income employees with more modest lodgings might not witness significant tax relief.
