The Central Board of Direct Taxation has introduced new rules, effective from September 1, 2023, that benefit employees provided with rent-free accommodation from non-government sources. The changes lower the taxable value of these accommodations, reducing the tax burden on employees. Under the new rules, the valuation rates for such perquisites have been reduced, resulting in lower Tax Deducted at Source (TDS) and higher in-hand salaries for employees. This adjustment takes into account factors like accommodation type, location, and furnishing.
For instance, under the previous rules, a salary of Rs 1,000 with a 15% accommodation value resulted in a net salary of Rs 885 after 10% TDS. Under the new rules, with a 10% accommodation value, the net salary is Rs 890, despite the same salary and TDS rate. The rules also introduce inflation-linked caps and exceptions, ensuring fair taxation for employees. These changes aim to simplify and streamline the taxation of rent-free accommodation, ultimately increasing take-home pay for employees.