Friends,
Here we will discus the topic "Rules for valuation of Residential Accommodation provided by the employer "
Residential Accommodation provided by the employer [Rule 3(1)]:-
"Accommodation" includes a house, flat, farm house or part thereof, hotel accommodation, motel, service apartment, guest house, a caravan, mobile home, ship or other floating structure.
A. For valuation of the perquisite of rent free unfurnished accommodation, all employees are divided into two categories:
(i) For employees of the Central and State governments the value of perquisite shall be equal to the licence fee charged for such accommodation as reduced by the rent actually paid by the employee. Employees of autonomous, semi-autonomous institutions, PSUs/PSEs & subsidiaries, Universities, etc. are not covered under this method valuation.
(ii) For all others, i.e., those salaried taxpayers not in employment of the Central government and the State government, the valuation of perquisite in respect of accommodation would be at prescribed rates, as discussed below:
a) Where the accommodation provided to the employee is owned by the employer:
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S.No.
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Cities having population as per the 2001 census
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Perquisite
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1.
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Exceeds 25 lakh
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15% of Salary
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2.
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Exceeds 10 lakhs but does not exceed 25 lakhs
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10% of Salary
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3.
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For other places
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7.5% of Salary
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b) Where the accommodation so provided is taken on lease/ rent by the employer:
The prescribed rate is 15% of the salary or the actual amount of lease rental payable by the employer, whichever is lower, as reduced by any amount of rent paid by the employee. Meaning of ‗Salary ‗for the purpose of calculation of perquisite in respect of Residential Accommodation:
a. Basic Salary;
b. Dearness Allowance, or Dearness Pay if it enters into the computation of superannuation or retirement benefit of the employees;
c. Bonus;
d. Commission;
f. All other taxable allowances (excluding the portion not taxable); and
g. Any monetary payment which is chargeable to tax (by whatever name called).
Salary from all employers shall be taken into consideration in respect of the period during which an accommodation is provided. Where on account of the transfer of an employee from one place to another, he is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value for a period not exceeding 90 days and thereafter the value of perquisite shall be charged for both such accommodation.
B. Valuation of the perquisite of furnished accommodation- the value of perquisite as determined by the above method (in A) shall be increased by-
i) 10% of the cost of furniture, appliances and equipments, or
ii) where the furniture, appliances and equipments have been taken on hire, by the amount of actual hire charges payable and the value so arrived shall be reduced by any charges paid by the employee himself.
It is added that where the accommodation is provided by the Central Government or any State Government to an employee who is serving on deputation with anybody or undertaking under the control of such Government,-
(i). the employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation; and
(ii). the value of perquisite of such an accommodation shall be the amount calculated in accordance with Table in A(ii)(a) above, as if the accommodation is owned by the employer.
C. Furnished Accommodation in a Hotel: The value of perquisite shall be determined on the basis of lower of the following two:
1. 24% of salary paid or payable in respect of period during which the accommodation is provided; or
2. Actual charges paid or payable by the employer to such hotel, for the period during which such accommodation is provided as reduced by any rent actually paid or payable by the employee.
However, nothing in C shall be taxable if following two conditions are satisfied:
1. The hotel accommodation is provided for a total period not exceeding in aggregate 15 days in a previous year, and
2. Such accommodation is provided on an employee‘s transfer from one place to another place.
It may be clarified that while services provided as an integral part of the accommodation, need not be valued separately as perquisite, any other services over and above that for which the employer makes payment or reimburses the employee shall be valued as a perquisite as per the residual clause. In other words, composite tariff for accommodation will be valued as per the Rules and any other charges for other facilities provided by the hotel will be separately valued under the residual clause.
D. However, the value of any accommodation provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site or a dam site or a power generation site or an off-shore site will not be treated as a perquisite if:
i) such accommodation is located in a ―remote area‖ or
ii) where it is not located in a ―remote area‖, the accommodation is of a temporary nature having plinth area of not more than 800 square feet and should not be located within 8 kilometers of the local limits of any municipality or cantonment board.
A project execution site here means a site of project up to the stage of its commissioning. A "remote area" means an area located at least 40 kilometers away from a town having a population not exceeding 20,000 as per the latest published all-India census.
