New Delhi :
In a significant development, the Income Tax Department has introduced a new rule that is set to positively impact the financial situation of working individuals across the country.
The latest change focuses on the valuation of rent-free accommodation provided by companies to their employees and is expected to lead to an increase in the take-home salary for the salaried class.
The Central Board of Direct Taxes (CBDT) has issued an official notification, heralding this beneficial change in income tax rules. Effective from September 1, the alteration primarily focuses on how the value of rent-free accommodation is assessed.
Revised Valuation Criteria
The revamped rule distinguishes between employees, excluding central and state government employees, who reside in company-owned houses. The key aspect of this change is the valuation of unfurnished accommodation provided by the company itself.
Urban Area Classification Matters
Under the new rule, urban areas with a population exceeding 40 lakh as per the 2011 census will experience a shift in how house rent allowance (HRA) is calculated.
This is a departure from the previous rule, where cities with a population of 25 lakh as per the 2001 census had HRA equal to 15 percent of the salary.
Employee Benefits Explained
To illustrate the advantages of this new rule, let’s consider a scenario where an employee resides in company-provided housing.
The valuation of this accommodation will now be determined using the updated formula, resulting in reduced deductions from the total salary.
Consequently, employees will enjoy a higher in-hand salary each month.
Experts opine that while this boosts employees’ take-home pay and savings, it may lead to a decrease in government revenue.
This significant revision in income tax rules is expected to provide financial relief to a large section of the working population, leading to increased financial security and enhanced savings for individuals.