Employers normally present a number of amenities to their workers considered one of which is Lodging for Residence of the Worker. Typically, this lodging is given to the worker with none cost and in some circumstances a nominal lease is obtained from the worker.
Such amenities that are given not in money however in form by the employer are known as Perquisites. If these amenities weren’t given by the employer, the worker would have incurred expenditure for such amenities from his personal pocket.
And subsequently, such perquisites (amenities) are thought-about as further advantages arising to the worker from his employment and earnings tax can be liable to be paid on such amenities obtained in form by the worker.
Such further amenities are added to the wage earnings of the worker as Perquisites within the Revenue Tax Return and chargeable to Tax as per Revenue Tax Slab Charges.
- Really useful Learn: Computation of Revenue Tax on Wage
Revenue Tax therapy of Hire Free or Concessional Fee of Lodging
In some circumstances, the Lodging is Hire Free to the Worker i.e. No Hire is liable to be paid by the Worker and in some circumstances, a concessional lease is charged from the worker. Each of those are advantages given to the worker in form and subsequently kind part of perquisites and earnings tax is liable to be paid on such perquisites.
Lodging given to an worker is split within the following classes and tax therapy of every class is separate:-
- Lodging given by Govt
- Unfurnished Lodging
- Furnished Lodging
- Lodging given by Non Govt.
- Unfurnished Lodging
- Furnished Lodging
Revenue Tax on Lodging given by the Govt.
If any lodging is given by the Central or the State Govt to its workers, earnings tax could be levied within the method specified under.
| License Price decided by Central or State Govt | xxx | |
| (Much less) | Hire paid by the Worker | (xxx) |
| (=) | Taxable worth of perquisite for Unfurnished Lodging | xxx |
| License Price decided by Central or State Govt | xxx | |
| (Add) | Lease Costs of Furnishings in case of Leased Furnishings or 10% Depreciation on Furnishings in case it’s owned by Employer | xxx |
| (Much less) | Hire paid by the Worker | (xxx) |
| (=) | Taxable worth of perquisite of Furnished Lodging | xxx |
Revenue Tax on Hire Free/ Concessional Lodging given by Non Govt
In case the employer is just not Central or State Govt., the earnings tax on Hire Free/ Concessional Fee of Lodging could be levied within the method specified under:-
In case of Unfurnished Lodging
In case of Unfurnished Lodging, it ought to first be ascertained whether or not the lodging is owned by the employer or the employer has taken the lodging on lease.
| Inhabitants exceeds 25 Lakhs | Inhabitants exceeds 10 Lakh however lower than 25 Lakh | Inhabitants is lower than 10 Lakh |
| 15% of Wage | 10% of Wage | 7.5% of Wage |
| (Much less) Hire paid by Worker | (Much less) Hire paid by Worker | (Much less) Hire paid by Worker |
| Precise Hire paid by Employer or 15% of Wage (whichever is decrease) | xxx | |
| (Much less) | Hire paid by Worker | (xxx) |
| (=) | Taxable worth of Perquisite | xxx |
In case of Furnished Lodging
| Worth of Unfurnished Owned Lodging as computed above | xxx | |
| (Add) | Lease Costs of Furnishings in case of Rented Furnishings or 10% Depreciation on Furnishings in case it’s owned by Employer | xxx |
| (Much less) | Hire obtained | (xxx) |
| (=) | Taxable Worth of Perquisite | xxx |
| Worth of Unfurnished Leased Lodging as computed above | xxx | |
| (Add) | Lease Costs of Furnishings in case of Leased Furnishings or 10% Depreciation on Furnishings in case it’s owned by Employer | xxx |
| (Much less) | Hire obtained | (xxx) |
| (=) | Taxable Worth of Perquisite | xxx |
Revenue Tax on Lodging offered by Employer in a Lodge
| Lease Costs payable to the Lodge or 24% of Wage (whichever is decrease) | xxx | |
| (Much less) | Hire paid by the Worker | (xxx) |
| (=) | Taxable Worth of Perquisite | xxx |
Nonetheless, in case such lodging is offered for a interval not exceeding 15 days on his switch from one place to a different, it wont be thought-about as a Perquisite. and subsequently tax wont be levied in such a case.
Exception for Lodging on Account of Switch
The place on account of Switch of an Worker from one place to a different, the worker is supplied with on the new place of posting whereas retaining the lodging on the different place, the taxable worth of such lodging is decided on the subject of just one such lodging which has the decrease worth for a interval not exceeding 90 days and thereafter the worth of perquisite shall be charged for each lodging.
Which means of Wage for the aim of computation of Taxable Worth
Wage consists of pay, allowance, bonus, fee or every other financial fee by no matter title referred to as however doesn’t embody:-
- Dearness Allowance or Dearness Pay except it enters into the computation of Superannuation or Retirement Advantages of the Worker
- Employers Contribution to the Provident Fund Account of the Worker
- Allowance that are exempted from the fee of Tax
- Worth of Perquisites laid out in Part 17(2)
Different Related Factors
- Furnishings consists of TV, Radio, Fridge, AC, Different Devices and many others
- Lodging features a Home, Flat, Farm Home or half thereof or lodging in a motel, service house, visitor home, caravan, cell dwelling, ship or different floating construction
- Motel consists of licensed lodging within the nature of Motel, Service Condo or Visitor Home
- Wage is to be computed on due foundation for the interval for which the lease free lodging has been offered to the worker.
If the worker receives wage from greater than 1 employer, the combination of the wage obtained from each the employers for the interval for which the lodging is offered must be taken into consideration for the aim of lease free lodging despite the fact that the lodging has been offered solely by 1 employer.