In a move that will positively impact employees with substantial salaries and employer-provided rent-free housing, the income tax department has announced revisions to the valuation norms for such accommodations. According to a PTI report, the new changes will come into effect from September 1, and will likely increase take-home salaries for eligible employees.
The Central Board of Direct Taxes (CBDT) has notified the amendments to the Income Tax Rules, bringing about these changes. The modifications concern the valuation of unfurnished accommodations that are owned by employers and offered to employees outside the central or state government sector.
According to the revised notification, the valuation for such accommodations will be as follows:

Notably, this amendment brings forth beneficial consequences for employees receiving significant salaries and employer-provided accommodations. In the PTI report, Amit Maheshwari, Tax Partner at AKM Global, highlighted the reduction in taxable base due to these revised rates. He stated, “The perquisite value shall be lower resulting in relief to them in the form of take-home pay.”
Gaurav Mohan, CEO of AMRG & Associates, emphasized that these changes align with the insights from the 2011 census data. The aim is to streamline the calculation of perquisite value.
Mohan remarked, “Employees enjoying rent-free accommodation would see rationalisation of perquisite value leading to a reduction in taxable salary, increasing the net take-home pay.”
According to Gaurav Mohan while the reduction in the perquisite value of will generate tangible savings for employees, it will also mean in a corresponding decrease in government revenue.
He further pointed out that this alteration will disproportionately benefit higher-income employees who receive more expensive accommodations. In contrast, lower-income employees with more modest lodgings might not witness significant tax relief.
Mohan also said that corporations might strategically reassess and reshape their existing compensation frameworks. This is particularly likely if they can capitalize on tax advantages for their workforce, he said.