• Notification Date: 04-09-2023
• Notification No: N/A

New Income Tax Rules applicable for Salaried Taxpayers from 1 September 2023

The Central Board of Direct Taxes (CBDT) has notified amendments to the Income Tax Rules for valuing perquisites of rent-free or concessional accommodation by employers to employees. Employees who receive rent-free housing from their employers will have to pay only less in taxes, increasing their take-home pay. The new regulation has taken effect from September 1, 2023, and the new income tax rules emphasises that the taxable value of rent-free accommodation will be reduced which means less tax resulting in an increase in take-home salary. The Finance Act, 2023, brought in an amendment for the purposes of calculation of ‘perquisite’ with regard to the value of rent-free or concessional accommodation provided to an employee, by his employer. 

The new income tax rules that will provide relief to the taxpayers provides that:  

a) 10 percent of salary in cities having a population exceeding 40 lakhs as per the 2011 census.  

b) 7.5 percent of salary in cities having a population exceeding 15 lakhs but not exceeding 40 lakhs as per the 2011 census. 

Perquisite is defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. “Perquisite” is defined in the section 17(2) of the Income Tax Act, 1961. 

“Rent-free housing is a perk provided by the employer to employees, in which the employee receives a place to live from the employer for little to no cost. It’s an employee benefit that is taxed under the “Salaries” heading and is related to their employment.” The new income tax rules are set to impact the taxpayers. The Employees will pay less tax due to the decreased taxable value of rent-free housing, increasing their take-home pay. Starting from 1st September 2023 under the new amendments, employees who are provided with unfurnished rent-free accommodation from non-government sources will get a reduction in the valuation of such houses i.e., their taxable base is going to be reduced now with the revised rates.