There is good news for salaried individuals. The Central Board of Direct Taxes (CBDT) has provided a huge relief to them if they have been provided with rent-free houses.
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According to the new rules, employees who have been given rent-free accommodation by their company will get a deduction in the taxable value of rent-free accommodation, increasing their in-hand salaries. CBDT has notified amendments to the Income Tax rules which will come into effect from September 1 this year.
Going by the latest rules, if an employee has been given an unfurnished accommodation by their employer, and the ownership of such accommodation is with the company, the valuation of such accommodation for tax purposes will now be different.
The changes in the rules are based on the 2011 census. They will also take into account the population of the city where the accommodation has been provided. The new rules suggest that in the urban areas where the population is more than 40 lakhs according to the 2011 census, the HRA will be 10 percent of the entire salary. Earlier, the HRA was 15 per cent according to the 2001 census.
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The Finance Act of 2023, had brought in an amendment for the purposes of calculation of ‘perquisite’ with regard to the value of rent-free or concessional accommodation provided to an employee, by his employer.
Amit Maheshwari, Tax Partners at AKM Global said, “Employees who are drawing adequate wages and living in employer-provided accommodation will now be able to save more as their taxable base is going to reduce with the revised rates. In such a situation, the value of his house will decrease and his salary will also increase.”
Additionally, Gaurav Mohan, the CEO of AMRG & Associates said that the taxable salary of employees for calculating the HRA will come down now, hence, they will get a rise in their take-home salary. While this will increase the savings of the employees, it will decrease the overall revenue of the government.
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The latest amendment by the CBDT is being seen as a welcome change by the salaried employees.
