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The Central Board of Direct Taxes issues the Income-tax (Eighteenth Amendment) Rules, 2023 to amend the rules for the valuation of residential accommodation provided by employers. The rules apply to employers and employees who receive residential accommodation perquisites. The new rules take effect on the first day of September 2023. The amendments update the percentage rates of salary for unfunded accommodations provided by non-government employers based on population thresholds from the 2011 census. The rules also provide specific exceptions for accommodations at remote sites, double accommodations during transfers, and limits for accommodations continued over multiple previous years.
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MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 18th August, 2023 INCOME-TAX
G.S.R. 615(E).—In exercise of the powers conferred by sub-clause (i) and Explanation to sub-clause (2) of section 17 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:‒
(2) They shall come into force with effect from the 1st day of September, 2023. 2. In the Income-tax Rules, 1962, in rule 3,—
(i) for sub-rule (1), the following shall be substituted, namely: -
‘(1) The value of residential accommodation provided by the employer, for the purpose of sub-clauses (i) and (ii) of sub-section (2) of section 17, during the previous year shall be determined on the basis provided in the table I given below: TABLE-I
| Sl. No. | Circumstances | Where accommodation is unfurnished | Where accommodation is furnished |
|---|---|---|---|
| (1) | (2) | (3) | (4) |
| (1) | Where the accommodation is provided by the Central Government or any State Government to the employees either holding office or post in connection with the affairs of the Union or of such State. | License fee determined by the Central Government or any State Government in respect of accommodation in accordance with the rules framed by such Government as reduced by the rent actually paid by the employee. | The value of perquisite as determined under column (3) 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 if such furniture is hired from a third party, 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. |
| (2) | Where the accommodation is
provided by any other employer
and—
(a) where the accommodation is owned by the employer, or | (i) 10% of salary in cities
having population exceeding
40 lakhs as per 2011 census;
(ii) 7.5% of salary in cities having population exceeding 15 lakhs but not exceeding 40 lakhs as per 2011 census; (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. | The value of perquisite as determined under column (3) 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. |
| (b) where the accommodation is taken on lease or rent by the employer. | 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. | The value of perquisite as determined under column (3) 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. | |
| (3) | Where the accommodation is provided by the employer specified in serial number (1) or (2) in a hotel (except where the employee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to another). | Not applicable | 24% of salary paid or payable for the previous year or the actual charges paid or payable to such hotel, which is lower, for the period during which such accommodation is provided as reduced by the rent, if any, actually paid or payable by the employee: |
Provided further that where on account of his transfer from one place to another, the employee 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 with reference to the Table above for a period not exceeding ninety days and thereafter the value of perquisite shall be charged for both such accommodations in accordance with the Table:
Provided also that where the accommodation is owned by the employer and the same accommodation is continued to be provided to the same employee for more than one previous year, the amount calculated in accordance with SL. No.2(a) or 2(b) shall not exceed the amount so calculated for the first previous year, as multiplied by the amount which is a ratio of the Cost Inflation Index for the previous year for which the amount is calculated and the Cost Inflation Index for the previous year in which the accommodation was initially provided to the employee. Explanation 1.- For the purposes of this sub-rule, where the accommodation is provided by the Central Government or any State Government to an employee who is serving on deputation with any body 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 Sl. No. (2)(a) of Table- I, as if the accommodation is owned by the employer. Explanation 2.— For the purposes of third proviso,-
(i) “Cost Inflation Index” means the index notified by the Central Government in Official Gazette under clause (v) of Explanation to section 48;
(ii) “first previous year” means the previous year 2023-2024, or the previous year in which the accommodation was provided to the employee, whichever is later.;
(ii) in the Explanation, for clause (v), the following clause shall be substituted, namely:-
‘(v) “remote area”, for purposes of proviso to sub-rule(1) means any area other than an area which is located-
[Notification No. 65/2023/F. No. 370142/21/2023-TPL Part (1)] AMRIT PRITOM CHETIA, Under Secy.
Note: The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section-3, Sub-section (ii), vide notification number S.O. 969 (E) dated the 26th March, 1962 and was last amended vide notification number G.S.R. 607(E) dated 17 August, 2023.
