Rent Free Accomodation ppt

Rent free accomodation

1. Rent Free Accomodation Dr.P.Ravichandran, M.Com., M.B.A., M.A (Astrology)., M.Phil., Ph.D., D.C.P., D.L.L & A.L., P.G.D.C.A., P.G.D.P.M & I.R., Associate Professor of Commerce, S.B.K. College, Aruppukottai – 626101. E-mail id: [email protected] 9443424090 & 9080030090

2. ACCOMODATION Accommodation shall include a – House; Farm-house; Flat; Hotel accommodation; Guest house; Caravan; Mobile home; Ship etc.

3. Rent Free Accommodation (Sec 17 (2)( i ) ) Central / State Govt. Employees Other than Govt. Employees Rent as per Govt. Rules Accommodation Owned by Employer Accommodation is taken on Lease/Rent by Employer Population of City, upto 10 Lacs Taxable Value, 7.5% of Salary Population of City, Between 10 Lacs to 25 Lacs Taxable Value, 10% of Salary Population of City, above 25 Lacs Taxable Value, 15% of Salary Perquisite is Lower of below a) 15% of Salary b) Rent paid by employer Valuation of Unfurnished Rent Free Accommodation

4. Valuation of Furnished House If furniture is provided then – i f owned – 10% of c ost of furniture (or) if taken on rent – actual hire charges shall be added with unfurnished house. Any rent collected by employer from employee, such amount is deductible from taxable perquisite .

5. Salary for RFA Here, Salary means all Cash salary received or receivable in hand ( including taxable allowances ) by the employee himself . Excludes all *perquisites and *DA which will not come under retirement purpose Note: Salary shall be taken on basis for the period for which accommodation has been provided . Hence advance salary if any shall not be taken into account. Employer’s contribution does not come to the assessee in cash as it is paid directly to the department . That is why I have mentioned the meaning of salary is cash salary received by the assessee himself .

6. Salary = Basic salary + DA, (if terms of employment so provide) + Bonus (Current year) + Commission + taxable portion of all allowances + Any monetary payments which is chargeable [ but not to include perquisites u/s 17(2) ]

7. House provided at concessional rent [ Sec.17(2)(ii) ] Means employer has given a house to his employee for which he is charging a part of rent . Value of unfurnished house xxxxx Add : 10% p.a. of cost of furniture (or) Actual hire charges xxxx xxxxx Less : Amount paid by the employee xxxx Value of house at concessional rent xxxxx

8. Taxable value of perquisite = 24% of salary paid or payable only for the period of accommodation provided; (or) Actual charges paid or payable by the employer to such hotel. Whichever is lower Note:- 1. If period of stay is more than 15 days, the first 15 days is not taxable and the remaining 15 days is taxable (38 – 15 = 23days); 2. If some part is paid by employee, that will be deducted . Valuation of Hotel Accommodation Where the hotel accommodation (motels, guest houses etc.) is provided only on his transfer from one place to another place; and the period of stay is more than 15 days.

9. Rent F ree Accommodation when NOT chargeable [ Rule 3(1) ] The value of perquisite shall be NIL in case of * Judges of High Courts. * Judges of Supreme Courts. * Union Ministers. * Opposition Leader. * Officials in Parliament. * Where the temporary accommodation is provided to an employee working in mining site or project execution site or a dam site or power generating site or offshore site or remote area.

10. Valuation of Furnished House If the furniture is provided then – i f owned – 10% of c ost of furniture (or) if taken on rent – actual hire charges shall be added with unfurnished house. Here, Salary means Salary = Basic salary + DA, (if terms of employment so provide) + Bonus (Current year) + Commission + taxable portion of all allowances + Any monetary payments which is chargeable [ but not to include perquisites u/s 17(2) ] Rent Actually paid by employee will be reduced from the perquisite.

11. PERQUISITES Perquisites may be defined as benefits attached to an office or position in addition to Salary or Wages. Perquisites may be provided in cash or in kind. Perquisites are included in salary only if they are received by an employee from his employer ( may be former, present or prospective.) Perquisites received from a person other than employer, are taxable under the head “PGBP” or “IOS”. A benefit or advantage would be taxable as perquisites only if it has legal origin. As unauthorised advantage taken by an employee, without employer’s authority would create a legal obligation to restore such advantage, it would not amount to perquisite taxable under the Act.

12. TYPES OF PERKS Taxable in specified cases Exempted Perks (Tax-free perks) Taxable Perks

13. EXEMPTED FROM TAX Tax-free perks Free medical facilities or reimbursement of medical expenditure; Free refreshment supplied at work place; Free meals given at remote area or offshore; Free recreational facilities; Provision for telephone including mobile phones; Education in employer’s institution - exempt upto ` 1000 p.m. per child ; Cost of refresher course; Any rent free residential; Goods sold by employer to employee; Contd …

14. Free ration received by employees; Perquisites to Govt. employees posted abroad; Rent free house given to officers of Parliament . Conveyance facilities to judges; Any amount contributed by employee towards pension; Computers, laptops given to employee for personal use; Transfer of movable assets – after using 10 years or more; Accident insurance premium; Interest-free (or) concessional loan ( not > ` 20,000 ); Periodicals and journals for discharge of work; Leave Travel Concession (LTC).

15. Perks taxable in all cases Rent free accommodation; Concession rent of accommodation; Obligation of employee met by employer – (PT, IT) Domestic servants engaged by employee and salary paid by employer; Gas, electricity and water bills paid by employer; Any bills in the name of employee for personal expenses paid by employer; Gift or gift voucher exceeds ` 5,000; Lunch or dinner provided – if cost per meal > ` 50.

16. Perks taxable in specified case s Specified employees mean, a) Director employee, (or) b) Employees having 20% or more voting rights in employer company, (or) c) Employees monetary salary is more than ` 50,000 /- p.a. [ Here, salary means all taxable benefit after deduction u/s 16(ii) and 16(iii) ] However, now-a-days, this classification does not have much practical utility, because of Salary norms of ` 50,000 /- p.a. Specified Employees-[ u/s 17(2)(iii) ]

17. -: Specified Employees :- [u/s 17(2)(iii) ] Specified employees mean, a) Director employee, or b) Employees having 20% or more voting rights in employer company, or c) Employee having salary more than Rs.50,000/- p.a. ( Here, salary means all taxable benefit after deduction u/s 16) Notes : Certain Perquisites are taxable in the hands of ALL employees Certain Perquisites are taxable in the hands of Specified employees only. Any employee, other than a specified employee, is a “non-specified employee”. However, now-a-days, this classification does not have much practical utility, because of Salary norms of Rs.50000/- p.a.