Quiz for the week (04 Mar 2024):
Harish, a fresh Chartered Accountant joined MM Ltd as Credit Risk manager on 1st
September,2023 for a monthly salary consisting of Rs.2 lakhs as basic pay and
50% of basic pay as Dearness Allowance (eligible for retirement benefits). He
was given rent-free accommodation in Chennai. The accommodation was owned by
the company. Employer contributed 30,000 per month to recognised provident
fund. Compute the perquisite value of accommodation for the assessment year
2024-25.
Best Answer :
Rule 3(1) of the Income-tax rules, 1962 was amended w.e.f. 01.09.2023 providing relief in
respect of rent-free accommodation provided by the employer to the employee
with reduction in perquisite valuation. The amendment is made both in respect
of accommodation owned by the employer and accommodation taken on rent or lease
by the employer for providing the same to the employee.
The following table explains the perquisite value determination:
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Where
the accommodation is provided by any other employer and
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(a) where the accommodation is
owned by the employer
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(i) 10% of salary in cities having
population exceeding 40 lakhs as per 2011 census;
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The
value of perquisite as determined under column (2) and increased by 10% per
annum of the cost of furniture (including television sets, radio sets,
refrigerators, other household appliances, air-conditioning plant or
equipment or other similar appliances or gadgets) or if such furniture is
hired from a third party, by the actual hire charges payable for the same as
reduced by any charges paid or payable for the same by the employee during
the previous year.
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(ii) 7.5% of salary in cities
having population exceeding 15 lakhs but not exceeding 40 lakhs as per 2011
census;
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(iii) 5% of salary in other
areas, in respect of the period during which the said accommodation was
occupied by the employee during the previous year as reduced by the rent, if
any, actually paid by the employee.
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(b) where the accommodation is
taken on lease or rent by the employer.
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Actual
amount of lease rental paid or payable by the employer or 10% of salary,
whichever is lower, as reduced by the rent, if any, actually paid by the
employee.
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The
value of perquisite as determined under column (2) and increased by 10% per
annum of the cost of furniture (including television sets, radio sets,
refrigerators, other household appliances, air-conditioning plant or
equipment or other similar appliances or gadgets) or if such furniture is
hired from a third party, by the actual hire charges payable for the same as
reduced by any charges paid or payable for the same by the employee during
the previous year.
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In this case, the salary and dearness allowance for the period of 7 months i.e. from 1st
September, 2023 to 31st March, 2024 to be considered for perquisite
valuation.
The basic pay plus DA = Rs.3,00,000 per month.
For 7 months the total salary is Rs.21,00,000.
Perquisite value of accommodation for the assessment year 2024-25 @ 10% being Rs.2,10,000.
Note: Since the accommodation is at Chennai the valuation is done @10% of the salary. It
may be noted that the salary for this purpose would include basic pay + DA if
it is eligible for retirement benefits. In this case, it is stated specifically
that the DA is eligible for retirement benefits, hence considered.
Suresh Kumar Jain,
Andhra Pradesh
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