With booming salary packages, Indian corporate have also started proving accommodation facility to their top level executives. It is a perquisites as per Income Tax Act, 1961. Let us understand the tax of it.
- Relevant terms:
a. Accommodation includes flat, farm house or part thereof or accommodation in a hotel , motel , service apartment ,guest house, caravan ,mobile home , ship or other floating structure .
b. Hotel includes licensed accommodation in the nature of motel , service apartment or guest house. Accommodation provided in a hotel will not be a taxable perquisite if –
- The period of such accommodation does not exceeds 15 days, and
- Such accommodation has been provided on the transfer of the employee from one place to another.
- Value of unfurnished accommodation provided by the government :
As per explanation 1 to sec.17 (2), value of taxable unfurnished accommodation provided by the central or state government shall be as computed under-
Particualar Rs. License fee determine by the government xxx Less : rent recovered from the employee (xxx) Value of taxable unfurnished accommodation xxx
3. Value of unfurnished accommodation provided by employer other than govt: as per explanation to sec. 17 (2)
particular Rs. Computation of salary for valuation of accommodation facilities
2.D.A. if considered for retirement benefits
3.Bonus or commission or ex- gratia
4.All taxable allowance
5.Any other monetary payment
xxx Salary for the purpose of valuation of accommodation facilities xxx
a. Owned by the Emloyer
Place of accommodation cities having population exceeding 25 lakhs as per latest census cities having population 10 lakhs but not exceeding 25 lakhs as per latest census other places Gross Amount 15% of the salary 10% of the Salary 7.5% of the salary Less:Recovery Rent recovered from the exmployee Rent recovered from the exmployee Rent recovered from the exmployee Net Value b.Not owned by the employer-taken on lease by employer Rent paid by the employer or 15% of the salary whichever is lower Less: rent recovered from employee
c. Accommodation in hotel4. Value of furnished accomodation
24% of salary or actual charges whichever is lower Less : amount paid or payable by the employee
Particular Rs. Value of unfurnished accommodation as above
Add : value of furniture
If owned by employer then 10% p.a. of original cost of such furniture
If hired from third party then actual hire charges
xxx Less: any charges paid or payable by the employee XXX Value of furnished accommodation XXX
5. Valuation not applicable in certain cases :
a. Employees – the above rule of valuation is not applicable for accommodation provided to an employee working at
- Mining site
- Offshore site
- Dam site
- Onshore oil exploration site
- Project execution site
- Power generation site
- The accommodation should be of a temporary nature
- Plinth area should not exceed 800 square feet
- Accommodation should be located atleast 8 kms away from local limit of municipality/ cantonment, or on latest published all – India census.
6. Employees on deputation :
When the accommodation is provided by the central government or any state government to an employee who is serving on deputation with any body or undertaking under the control of such government –
a. The employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation , and
b. Value of perquisite of such an accommodation shall be the amount calculated as similar with accommodation is owned by the employer.
7. Employees on transfer:
a. For the first 90 days of transfer: where accommodation is provided both at existing place of work and in new place , the accommodation , which has lower value , shall be taxable.
b. After 90 days : both accommodation shall be taxable.
8. Fully exempt cases : exempted employees not liable to tax for accommodation provided by employer are-
a. Free accommodation facility ( in the form of official residence) given to supreme / high court judge
b. Free furnished residence given to a parliament official / union minister/ leader of opposition in parliament
c. Value of rent free official residence given to chairman / member of union public service commission in service.
d. Accommodation in a remote area for an individual working in a mining or mineral exploration site.
e. Accommodation in a hotel for a period upto 15 days for an employee on his transfer.
so this was is the TAX TREATMENT OF ACCOMMODATION FACILITY PROVIDED BY THE EMPLOYER 🙂