Revision in Valuation of Rent Free Accommodation Under the Income Tax Act, 1961

The Central Board of Direct Taxes (‘CBDT’) vide its notification dated August 18, 2023 revised Rule 3 to lower rates of rent-free accommodation valuation and introduces an inflation-linked cap. This will help the employees to earn more in hand salary as these changes would result in reduction in income tax.

Revised rates of valuation of rent free accommodation are as follows: 

• 10% of salary in cities having population exceeding 40 lakhs as per 2011 census. Earlier it was 15% of salary.
• 7.5% of salary in cities having population exceeding 15 lakhs but not exceeding 40 lakhs as per 2011 census;. Earlier it was 10% of salary.
• 5% of salary in other areas. Earlier it was 7.5%.
  
  

Complete notification attached here