Redefining Perks: New Tax Rules for Rent-Free Homes by Employers!
The Income Tax Department (I-T dept) has notified new rules for valuing rent-free homes provided by employers. The new rules came into effect on September 1, 2023.
The old rules, which were based on the 2001 census, had different valuation rates for different cities. The new rules, which are based on the 2011 census, have a single valuation rate for all cities.
The new valuation rates are as follows:
- In cities with a population of over 40 lakh, the valuation of rent-free accommodation is 10% of the employee’s salary.
- In cities with a population of 15 lakh to 40 lakh, the valuation is 7.5% of the employee’s salary.
- In cities with a population of less than 15 lakh, the valuation is 5% of the employee’s salary.
The new rules also provide for a lower valuation for employees who share the accommodation with others. The valuation is reduced by 5% for each additional person sharing the accommodation.
The new rules are expected to benefit employees who receive rent-free accommodation in large cities. These employees will now have to pay less tax on the value of the accommodation.
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