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Rent Free Accommodation Calculator

What is Considered Accommodation?

The phrase "accommodation" refers to the following: a flat, a farmhouse or a portion of one, a hotel or guest house, an apartment for service personnel, etc.

What is Rent-Free Accommodation?

It refers to a place of residence provided by an employer for an employee to live in. RFA can be provided either for free or at a reduced fee. Rent-free accommodations are counted as prerequisites. When calculating the taxpayer's total income for the purpose of submitting an Income Tax return, perquisites are added under the heading Salaries. Perquisites comprise the value of rent-free housing granted by each employer to the assessee. The taxpayer may work for more than one employer at the same time. In such cases, the total value of all rent-free lodgings given to the taxpayer will be taxed under the Act.

What are the Types of Accommodations Given to an Employee?

Accommodation given to an employee is divided into the following categories and tax treatment of each category is separate:-

  • Accommodation given by Govt:
    1. Unfurnished Accommodation
    2. Furnished Accommodation
  • Accommodation given by Non-Govt:
    1. Unfurnished Accommodation
    2. Furnished Accommodation
How to Calculate the Value of Rent-Free Accommodation?

The following factors must be considered when calculating the value of rent-free housing offered by a company to an employee:

  • The population of the city where rent-free housing is available
  • Nature of the furnishings used in the lodging

In the instance of rent-free housing offered to an employee when the property is held by the employer, the value of the perquisite would be computed based on the city's population as of the 2001 census.

Cities having a population of up to ten lakh people

If rent-free housing is offered in a city with a population of 10 lakh people, the rent-free housing would be rated as a perk at 7.5 per cent of the pay.

Cities having a population of up to 25 lakh people

The amount of the perk would be 10% of pay in cities with a population of less than 25 lakh but more than 10 lakh persons.

How to Calculate Income Tax on Rent-Free Accommodation? Employer: Government
Case 1: Unfurnished and owned by Government
Licence Fees determined by Government 50,000
Less: Value recovered from employee 24,000
Taxable Value of Perquisite in Case I 26,000
Case 2: Furnished and owned by Government
Taxable Value of Perquisite as in Case I 26,000 Cost of furniture: 20,000
Add: 10% p.a. of the cost of furniture 2,000
Taxable Value of Perquisite in Case II 28,000
Case 3: Furnished and not owned by Government
Taxable Value of Perquisite as in Case I 26,000 Hire Charge: 5,000
Add: Actual hire charges payable 5,000
31,000
Employer: Government
Case 1: Unfurnished and owned by Government
Cities having population exceeding 25 lakhs as per 2001 census 15% of salary 1,50,000 Salary 10,00,000
Cities having population exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 census 10% of salary
Cities having population not exceeding 10 lakhs as per 2001 census 7.5% of salary
Less: Any amount receovered from employee XXXX 30,000
Cities having population not exceeding 10 lakhs as per 2001 census 7.5% of salary 1,20,000
Case 2: Furnished and owned by Government
Taxable Value of Perquisite as in Case I 1,20,000 Cost of furniture: 20,000
Add: 10% p.a. of the cost of furniture 2,000
Taxable Value of Perquisite in Case II 1,22,000
Case 3: Furnished and not owned by Government
Taxable Value of Perquisite as in Case I 1,20,000 Hire Charge: 5,000
Add: Actual hire charges payable 5,000
Taxable Value of Perquisite in Case III 1,25,000
Case 4: Unfurnished and accommodation is not owned by the employer
Actual Rent paid by the employer 1,20,000
15% of salary 1,50,000
Taxable Value of Perquisite in Case IV (whichever is lower 1,20,000
Case 5: Furnished and accommodation is not owned by the employer
Taxable Value of Perquisite in Case IV 1,20,000
10% p.a. of the cost of furniture (Furniture owned by employer) 2,000 Cost of Furniture: 20,000
Add: Actual hire charges payable (Furniture taken on lease by employer) 5,000 Hire Charge: 5,000
Taxable Value of Perquisite in Case V
Case 6: Unfurnished accommodation provided in Hotel
Not Taxable
Case 7: Furnished Accommodation provided in Hotel
Actual charges paid or payable for such hotel 30,000
24% of the salary 9,863
Amount recovered from employee 5,000
Amount recovered from employee 4,863
Benefits of Rent-Free Accommodation Calculator

The rent-free accommodation calculator helps you take the guesswork out of the taxable part of your rent-free accommodation. It's a simple and easy-to-use tool that helps you calculate the taxable value of your accommodation given by your employer.

Criteria for Using Rent-Free Accommodation Calculator

If you are working with a government or non-government organisation and are receiving unfurnished or furnished accommodation in any of the cities then you are eligible to use the calculator.

FAQ

1

What salary is considered for the purpose of Taxability of Rent free accommodation?

All emoluments provided to an employee except dearness allowance, allowances which are not included in the computation for retirement benefits, the value of perquisites under section 17(2), allowance which are exempt from tax, the employer's contribution to PF, and lump-sum payments received on retirement are considered for taxability of rent-free accommodation.

2

Is Tax2win calculator for calculating rent-free accommodation safe to use?

Yes, Tax2win’s rent-free accommodation calculator is totally safe to use. The company is an authorised Income Tax Department portal.

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