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Notification: S.O.940(E)
Section(s) Referred: s. 3
Date of Issue: 25/9/2001
S.O. 940(E) – In exercise of powers conferred by section 295, read with clause (2) section 17 and sub-section (2C) of section 192 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely :-

1. (1) These rules may be called the Income-tax (22nd Amendment) Rules, 2001.
(2) They shall be deemed to have come into force on the 1st day of April 2001.
2. In the Income-tax Rules, 1962,
(i) for rule 3, the following rule shall be substituted, namely :-
“3. Valuation of perquisites
For the purpose of computing the income chargeable under the head “Salaries”, the value of perquisites provided by the employer directly or indirectly to the assessee (hereinafter referred to as employee) or to any member of his household by reason of his employment shall be determined in accordance with the following sub-rules, namely: –
(1) The value of residential accommodation provided by the employer during the
previous year shall be determined on the basis provided in the Table below:-
Sl.No.                  Circumstances    Where the accommodation is unfurnished   Where the accommodation is furnished
(1)                       (2)                        (3)                        (4)
                            Where the accommodation is provided by Union or State Government to their employees either holding office or post in connection with the affairs of Union or State or serving with any body or undertaking under the control of such Government on deputation.     License fee determined    by Union or State Government in respect    of accommodation in       accordance with the       rules framed by that      government as reduced     by the rent actually paid by the employee.                              The value of perquisite as determined under col. (3) and increased by 10% per annum of the cost of furniture (including television sets, radio sets, refrigerators other house hold appliances, air conditioning plant or equipment) or if such furniture is hired from a third party, the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the employee during the previous year.
2          Where the accommodation  is provided by any other employer and
(a) where the accommodation is owned by the employer or
(b) where the accommodation is taken on lease or rent by the employer.     i) 10% of salary in cities  having population exceeding 4 lacs as per 1991 census; 
i) 10% of salary in cities  having population exceeding 4 lacs as per 1991 census; 
ii) 7.5% of salary in other cities, in respect of the   period during which the said accommodation was occupied  by the employee during the previous year as reduced by the rent, if any, actually  paid by the employee.      
Actual amount of lease rental paid or payable by the employer or 10% of salary whichever is lower as reduced by the rent , if any, actually paid by the employee.
Not applicable                                 24% of salary paid or payable for the previous year or the actual charges paid or payable to such hotel, which is lower, for the period during which such accommodation is provided as reduced by the rent, if any, actually paid or payable by the employee                                              
Provided that nothing contained in this sub-rule would be applicable to any accommodation located in a ‘remote area’ provided to an employee working at a mining site or an onshore oil exploration site, or a project execution site or an accommodation provided in an offshore site of similar nature:
(6) The value of any benefit or amenity resulting from the provision by any undertaking engaged in the carriage of passengers or goods to any employee or to any member of his household for personal or private journey free of cost or at concessional fare, in any conveyance owned, leased or made available by any other arrangement by the undertaking for the purpose of transport of passengers or goods shall be taken to be the value at which such benefit or amenity is offered by such undertaking to the public as reduced by the amount, if any, paid by or recovered from the employee for such benefit or amenity.
17, the following other fringe benefits or amenities are hereby prescribed and the value thereof shall be determined in the manner provided hereunder:-
(8) The value of any other benefit or amenity, service, right or privilege provided by the employer shall be determined on the basis of cost to the employer under an arms’ length transaction as reduced by the employees’ contribution, if any.
(9) This Rule shall come into force with effect from the 1st day of April, 2001. Provided that the employee may, at his option, compute the value of all perquisites made available to him or any member of his household for the period beginning on 1st day of April, 2001 and ending on 30th day of September, 2001 in accordance with the Rules as they stood prior to this amendment.
For the purposes of this Rule –
  1. “accommodation” includes a house, flat, farm house or part thereof, or accommodation in a hotel, motel, service apartment, guest house, caravan, mobile home, ship or other floating structure;
  2. “entertainment” includes hospitality of any kind and also, expenditure on business gifts other than free samples of the employers own product with the aim of advertising to the general public;
  3. “hotel” includes licensed accommodation in the nature of motel, service apartment or guest house;
  4. “member of household” shall include
    1. spouse(s)
    2. children and their spouses
    3. parents
    4. servants and dependants;
  5. “remote area”, for purposes of proviso to this sub-rule means an area that is located at least 40 kilometers away from a town having a population not exceeding 20,000 based on latest published all-India census;
  6. ‘salary’ includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called from one or more employers, as the case may be, but does not include the following, namely: –
    1. dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned;
    2. employer’s contribution to the provident fund account of the employee;
    3. allowances which are exempted from payment of tax;
    4. the value of perquisites specified in sub-section (2) of section 17 of the Income-tax Act;
    5. any payment or expenditure specifically excluded under proviso to sub-clause (iii) of clause (2) or proviso to clause (2) of section 17;.(vii) “maximum outstanding monthly balance” means the aggregate outstanding balance for each loan as on the last day of each month. “;
(ii) for rule 26A, the following rule shall be substituted, namely:-
“Furnishing of particulars of income under the head ‘Salaries’
26A .
  1. The assessee may furnish to the person responsible for making the payment referred to in sub-section (1) of section 192, the details of the income under the head “Salaries ” due or received by him from the other employer or employers referred to in sub-section (2) of that section and of any tax deducted at source from such income in Form No.12B.
  2. The person responsible for paying any income chargeable under the head “Salaries” shall furnish to the person to whom such payment is made, a statement giving correct and complete particulars of perquisites or profits in lieu of salary and the value there of in,-
    1. relevant columns provided in Form No.16, if the amount of salary paid or payable to the employee is not more than one lakh and fifty thousand rupees; or
    2. in Form No.12BA , if the amount of salary paid or payable to the employee is more than one lakh and fifty thousand rupees.
Explanation – ‘Salary’ for the purposes of this rule shall have the same meaning as given in rule 3.”;


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