Question: How is the perquisite for hotel accommodation provided to employees valued according to the Income-Tax Act, 1961?
Response given by CA (Dr.) Suresh Surana: When an employer provides accommodation to an employee in a hotel, except when the employee’s stay is for a period not exceeding 15 days due to a transfer, the value of perquisite is determined as lower of either 24% of the employee’s salary or the actual charges paid to the hotel, for the duration of the stay.
From this amount, any rent actually paid or payable by the employee is subtracted to arrive at the taxable perquisite value. Explanation to Rule 3 further clarifies the meaning of “salary” for calculating perquisites. It includes regular pay, allowances, bonuses, and commissions, regardless of the payment frequency.
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However, specific items are excluded from this meaning, such as Dearness Allowance, unless it factors into retirement benefits, employer contributions to provident funds, tax-exempt allowances, perquisites specified in Section 17(2), payments or expenses specifically excluded under certain provisions, lump-sum payments like gratuity and leave encashment upon retirement or termination.
Additionally, when an employee is relocated, the tax valuation for accommodation provided by the employer is governed by specific rules. During the first 90 days of relocation, if the employee retains accommodation at their previous location while also being provided accommodation at the new posting, the perquisite value is calculated based on the accommodation with the lower value.
However, if the duration of the stay surpasses 90 days, the tax treatment changes significantly, and the perquisite value becomes fully taxable for both accommodations.
Disclaimer: The views and facts shared above are those of the expert. They do not reflect the views of financialexpress.com
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