IT Notification No. 65/2023: Revised Rules for Employed Taxpayers W.E.F. 1st Sept
- knp gst
- Sep 4, 2023
- 2 min read
The Central Board of Direct Taxes (CBDT) has introduced modifications in the income tax regulations concerning the assessment of benefits related to employer-provided rent-free or discounted housing for employees. These amendments, effective from September 1, 2023, will result in reduced tax liability for employees receiving rent-free accommodations, which will be subject to higher take-home pay.
The Finance Act of 2023 introduced an amendment specifically addressing the calculation of ‘perquisite’ related to the value of rent-free or concessional housing provided by employers to their employees. The new income tax rules, aimed at providing tax relief to taxpayers, states the following:
In cities with a population exceeding 40 lakhs according to the 2011 census, 10 percent of the salary will be considered for taxation.
In cities with a population exceeding 15 lakhs but not exceeding 40 lakhs according to the 2011 census, 7.5 percent of the salary will be considered for taxation.
A “perquisite” is described as any incidental payment or advantage linked to a job or position, in addition to regular salary or wages. This definition is mentioned in Section 17(2) of the Income Tax Act, of 1961.
Rent-free housing is a benefit provided by employers to their employees, offering them a place to live without or with minimal cost. It’s a form of employee compensation subject to taxation under the “Salaries” category and is linked to their employment.
The new income tax rules will have an impact on taxpayers beyond any question. Employees will receive a reduction in their tax burden given the decreased taxable value of rent-free housing, resulting in higher take-home pay. Starting from September 1, 2023, these amendments will reduce the valuation of unfurnished rent-free accommodations from non-government sources, effectively reducing the taxable portion based on the revised rates.
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