Rent Free Accomodation

This query is : Resolved

G.N.V.D.Kiran

G.N.V.D.Kiran (Querist)
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27 March 2008 We are paying 50000/- per month Basic salry to a employee who is working in our branch office at bangalore we are given a flat for his resident our company has been paying an amount of Rs.20000/- p.m. towards flat rent and debited to rent - executives staff a/c while arriving of his personel income tax liability hou much of perquisite to be taken in his computation of total income

Annual Salary - 600000 p.a
Allowances - NIL
rent paid by the company for his rent free accomodation - 240000 p.a.

Reetika Goel

Reetika Goel (Expert)
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28 March 2008 RFA provisions have changed with effect from 1st April, 2006.
As per new provisions,value of RFA shall be:
1) If the population of the city in which RFA is provided exceeds 25 lacs, then 15% of RFA salary.
2) If the population of the city in which RFA is provided does not exceeds 25 lacs but exceeds 10 lacs, then 10% of RFA salary.
3)In any other case, 7.5% of RFA salary.

The above provision applies if the accomodation is owned by the employer.

However, if accomodation is rented one, then value of RFA shall be:
1) Rent paid by the employer(less amount recovered from the employee)
or
2) the value worked out above(considering the accomodation owned by employer)

whichever is less.

For the purpose of RFA, RFA salary shall mean:
1) Basic Pay
2) Dearness Pay/Dearness Allowance(if forms part of salary)
3) Bonus
4) Commission
5) All allowances
6) Gratuity, leave salary, if paid while in service (only for the period of RFA facility)

Now come back to ur question:
Basic Pay- Rs. 6,00,000
City of accomodation - Banglore
RFA shall be least of the following:
1) 15% of Rs. 6,00,000 i.e. Rs. 90,000
or
2) Rent paid by the employer i.e. Rs. 2,40,000.

Therefore RFA shall be Rs. 90,000.

I think its sufficient for ur query