Rent-free Accommodation

Rent-free Accommodation

Introduction
When an employer provides residential accommodation rent-free or at a concessional rate, the value of such a benefit is taxable as a perquisite under “Salaries.” This applies regardless of whether the accommodation is employer-owned or leased.

Key Provisions

• Definition
  • Accommodation includes houses, flats, hotels, guest houses, caravans, mobile home, ship or other floating structure.
• Calculation of Taxable Perquisite
  • Government Employees:
  • Taxable value is the license fee per government service rules.
  • Add 10% of the cost of provided furniture (or hire charges if applicable).
  • Non-Government Employees:
  • For employer-owned accommodation:
    • Value depends on city population and salary

• For leased accommodation:
• Taxable value is lower of 10% of salary or actual rent paid.

• Furnished Accommodation
  • Add 10% of furniture cost or hire charges to the perquisite value of unfurnished accommodation.
• Hotel Accommodation
  • Exempt for up to 15 days annually.
  • Beyond 15 days: Taxable value is the lower of 24% of salary or actual hotel charges.
• Subsequent Years
  • The perquisite value for subsequent years cannot exceed the first year’s value adjusted for Cost Inflation Index (CII).
• Remote Location Exemption
  • Accommodation in mining, dam, power generation, project execution, or off-shore/onshore oil exploration sites may be tax-free if:
  • The house size is ≤1,000 sq. ft. and situated at least 8 km away from the local limits of a municipality or cantonment board.
  • The accommodation is in a remote area, located at least 30 km away from a town with a population of less than 1,00,000 (as per 2011 census).
• Judges and Parliament Officials
  • Rent-free accommodation for High Court/Supreme Court Judges, Union Ministers, or Leaders of Opposition is exempt.
• Job Transfers
  • During relocation, only the lower-valued accommodation is taxed for 90 days. After 90 days, both accommodations are taxable.