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Thursday, 1 June 2017

Rent Free Accommodation (RFA)

Sometime, Employer provide the facility of Rent Free Accommodation to there Employee, But such facility is nor fully taxable or not fully exempted from the tax, There are condition regarding the taxability  under the head of Income From Salary under section 17.

There are two types Accommodation provided to there Employee
a. Unfurnished Accommodation
b. Furnished Accommodation

A. Under the Unfurnished accommodation, following are condition of taxability
1. Accommodation owned by the Employer, means company or employer have own accommodation provided to there employee. Under this amount taxable on the basis of Population:-

          Population                                    Accommodation Owned by Employer

  •  Above 25 lakhs                                   15% of Salary
  • 10 lakhs-25 lakhs                                 10% of Salary
  • Below 10 lakhs                                    7.5% of Salary
2. Accommodation taken on rent or lease by the employer or company and than provided to there employee.
          Population                                    Accommodation taken on rent or lease by Employer

  • 15% of Salary or Rent paid by employer, whichever is lower

B. Under the Furnished accommodation, following are condition of taxability

  • Compute Value of Unfurnished Accommodation               xxx
  • Add:- 10% of Cost of Furniture                                          xxx
    •           Value of Furnished Accommodation            xxx
Salary means:-
  • Basic Salary
  • D.A.(forming part or retirement)
  • D.P.(forming part or retirement)
  • All Taxable Allowance:- Bonus, Medical Allowance & etc.

For Example:-
A. If Employer have own accommodation:-
Mr A.have basic salary of Rs. 15000 p.m., D.A.(forming part or retirement)  Rs. 5000 p.m., & taxable allowance Rs. 5000 p.m. & provide the accommodation in mumbai
Ans :- Salary of Mr A have Rs. 25000 p.m. & Rs. 3,00,000 p.a., than 15% of Salary
           Rs. 45,000/- will be value of taxable perquisite


B. If accommodation taken on rent or lease by employer:-
Mr A.have basic salary of Rs. 15000 p.m., D.A.(forming part or retirement)  Rs. 5000 p.m., & taxable allowance Rs. 5000 p.m. & provide the accommodation by employer taken on rent of Rs 3,500/- p.m. in mumbai.
Ans :- 1. Salary of Mr A have Rs. 25000 p.m. & Rs. 3,00,000 p.a., than 15% of Salary
               Rs. 45,000/- 
           2. Rent paid by employer 42,000/- p.a.
                    15% of salary or Rent paid, whichever is lower 
                   Rs. 42,000/- will be value of taxable perquisite

* If any amount of rent paid by the employee, In any case than such amount of rent paid by employee will be less from the value of taxable perquisite, as a amount reimbursed to the employer.

                                                                                                      

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