CBDT notifies Rule for determination of value of “perquisite” in respect of residential accommodation provided by employer to an employee.

Notification No. 65/2023

Download 65/2023- Central Tax Dated 4th August, 2023

A change was made to the Finance Act of 2023’s definition of “perquisite” for the purposes of valuing rent-free or inexpensive housing furnished to an employee by his company. In order to cater for this, the CBDT changed Rule 3 of the Income-tax Rules, 1961.

As opposed to the earlier 2001 census, the categorization and limitations of cities and population are now based on the 2011 census. 40 lakh instead of 25 lakh and 15 lakh instead of 10 lakh are the new population limitations. The modified Rule has now decreased the previous perquisite rates of 15%, 10%, and 7.5% of the pay to 10%, 7.5%, and 5% of the salary, respectively. This is summarised as under:

Previous Categorisation and Rates		New Categorisation and Rates
Population	Perquisite Rate	Population	Perquisite Rate
More than 25 lakh	15%	More than 40 lakh	10%
Between 10 lakh and 25 lakh	10%	Between 15 lakh and 40 lakh	7.5%
Less than 10 lakh	7.5%	Less than 15 lakh	5%

The Rule has also been further rationalized in order to determine a fair tax consequence of an employee occupying the same space for more than one prior year.