The Income tax (Eighteenth Amendment), Rules, 2023 was notified by the Central Board of Direct Taxes (CBDT) on August 18, 2023. These rules amend the Income-tax Rules, 1962, with effect from September 1, 2023.
The main amendment made by these rules is to the definition of “perquisite” in section 17 of the Income-tax Act, 1961. The definition has been expanded to include the value of rent-free or concessional accommodation provided to an employee by his employer.
The value of the perquisite will be determined on the basis of the following factors
- The annual value of the accommodation
- The cost of furniture provided with the accommodation
- The location of the accommodation
- The number of rooms in the accommodation
- The amenities provided with the accommodation
The value of the perquisite will be increased by 10% per annum of the cost of furniture. If the furniture is hired from a third party, the actual hire charges payable for the same will be used to determine the value of the perquisite.
The amended rules also provide for a few exemptions from the calculation of the value of the perquisite. These exemptions include
- Accommodation provided to an employee by the Central Government or a State Government
- Accommodation provided to an employee by a foreign government
- Accommodation provided to an employee by a charitable organization
- Accommodation provided to an employee by a religious organization
The Income tax (Eighteenth Amendment), Rules, 2023 are a significant change to the law on the taxation of perquisites. They will have a major impact on the tax liability of employees who are provided with rent-free or concessional accommodation by their employers.