193. Rule 3(a)(iii) of Income-tax Rules – Valuation of perquisite represented by free boarding and lodging in the case of hotel employees
1. Attention is invited to Board’s Circular, dated 2-3-1960 issued from F. No. 35/24/59-IT(A-I) on the above subject. A copy of this circular is enclosed for ready reference [printed here as Annex].
2. Rule 3 of the Income-tax Rules, 1962 lays down the mode of valuation of perquisites. The provisions of rule 3(a)(iii) would apply for valuation of rent-free residential accommodation provided by an employer to an employee. The valuation of perquisites in the form of free food will have to be determined in terms of rule 3(g).
3. In view of the specific provision contained in the rules as mentioned hereinabove, the Circular of 1960 stands superseded.
ANNEX – CIRCULAR DATED 2-3-1960 REFERRED TO IN CLARIFICATION
1. The Board observe that no uniform practice is being followed in all the Commissioner’s charges for the valuation of perquisites by way of free boarding and lodging in the case of hotel employees who are obliged to live in the hotel premises and who are provided free boarding. It has now been decided that the value of such perquisites should be determined as under :
Lodging – 12 per cent or 10 per cent of the salary (according as the accommodation provided is furnished or unfurnished) or the usual rent of the accommodation, whichever is less.
Boarding – The hotel’s actual cost (including overheads) of the food supplied to the employees.
2. The above formula is to be applied only to bona fide employees and not to directors who have a substantial interest in the hotel company.
Circular : No. 311 [F. No. 200/50/77-IT(A-I)], dated 24-8-1981.
