Rationalization of provisions related to the valuation of residential accommodation provided to employees – Budget 2023
As per clause (2) of section 17 of the Act, “perquisite” inter alia includes value of rent-free accommodation or value of any concession in the matters of rent provided to employees by the employer. The employer may be either Central/State Government or other than that, with different methodologies of valuation of perquisites for the two categories of employers.
2. However, the methodology to compute the value of rent-free accommodation is prescribed in Rule 3 of the Income-tax Rules, 1962 (the Rules), while the methodology to compute the value of any concession in the matters of rent provided to employees by the employer is prescribed in the Explanations to the clause (2) of section 17.
3. In order to rationalize this provision by prescribing a uniform methodology in the Rules for computing the value of perquisite and to clearly classify the two categories of perquisites with respect to accommodation provided by the employers, it is proposed to amend sub-clauses (i) and (ii) of clause (2) of section 17 of the Act. It is proposed to take the power of prescription of the method for computation of the value of rent-free accommodation provided to the assessee by his employer and the value of any accommodation provided to the assessee by his employer at a concessional rate.
4. Further, it is proposed to amend the Explanation 1 to sub-clause (ii) of clause (2) of section 17 of the Act so as to provide that accommodation shall be deemed to have been provided at a concessional rate if the value of the accommodation computed in the prescribed manner exceeds the rent recoverable from, or payable by, the assessee.
5. Further, it is proposed to delete the Explanation 2, Explanation 3 and Explanation 4 of sub-clause (ii) of clause (2) of section 17 of the Act to rationalize the section and specify the method of computation for the value the accommodation provided to employee by his employer through proper prescription of the Rules.
6. This amendment is proposed to take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.
[Clause 10]
Extract of relevant clause of Finance Bill 2023
Clause 10 of the Bill seeks to amend section 17 of the Income-tax Act relating to “Salary”, “perquisite” and “profits in lieu of salary” defined.
It is proposed to insert a new sub-clause (ix) in clause (1) of the said section so as to provide that the contribution made by the Central Government in the previous year to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 80CCH shall be considered as salary of that individual.
This amendment will take effect from 1st April, 2023 and will, accordingly, apply in relation to the assessment year 2023-2024 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
10. Amendment of section 17.
In section 17 of the Income-tax Act,––
(i) in clause (1), after sub-clause (viii), the following sub-clause shall be inserted, namely:––
“(ix) the contribution made by the Central Government in the previous year, to the Agniveer Corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in section 80CCH;”;
(ii) in clause (2), with effect from the 1st day of April, 2024,––
(a) in sub-clause (i), after the word “employer”, the words “computed in such manner as may be prescribed” shall be inserted;
(b) for sub-clause (ii) and Explanations 1 to 4 thereto, the following shall be substituted, namely:––
“(ii) the value of any accommodation provided to the assessee by his employer at a concessional rate.
Explanation.—For the purposes of this sub-clause, it is clarified that accommodation shall be deemed to have been provided at a concessional rate, if the value of accommodation computed in such manner as may be prescribed, exceeds the rent recoverable from, or payable by, the assessee;”.
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