Interest Free Loans from Employers in IndiaOctober 27, 2014
Understanding Residential Status as per Income Tax ActFebruary 5, 2015
Furnished or unfurnished house given by employer is taxable as perquisite to employees. Many manufacturing companies build colonies for their employees. Many corporates provide house to managerial level employees. Taxability on house provided by employer depends on the following conditions.
- Type 1: Rent free, unfurnished house provided by employer.
- Government Employees: Taxable value as perquisite is equal to license fees determined by the government. Government employees include Central, State, and Public Sector employees. Employees with local government authorities are excluded.
- Non-Government Employees: Perquisite value of the house depends upon population of the city and salary received by the employee.
- Where population of city exceeds 25 lakhs: 15% of the salary for period in which employee occupies the accommodation
- Where population of city exceeds 10 lakhs, and below 25 lakhs: 10 % of salary for period in which employee occupies the accommodation
- Where population of city is less than 10 lakhs: 7.5 % of salary for period in which employee occupies the accommodation
- Type 2: If house is taken on lease or rent by the employer then amount paid or payable for rent or 15% of salary, whichever is lower is taxable as perquisite.
- Type 3: Rent free furnished house provided by employer
- Value of perquisite on assumption that accommodation is unfurnished
- Value of furniture
- 10% of original cost of furniture, if the furniture is owned by the employer or
- Actual hire charges if the furniture is hired by the employer
- Total sum of conditions A & B above is calculated as perquisite
- Other points:
- Hotel accommodation for 15 days provided immediately after transfer at the new location is a tax-free perquisite.
When an employee is transferred and is provided an housing facility in the new location while retaining the house in the other location, the lower value of the two houses shall be treated as perquisite for a period not exceeding 90 days. After 90 days, the value of the perquisite shall be charged for both such accommodations.