Perquisites are the nature of benefit or concession that employees receive from their employer in addition to the Salary.  Some perquisites are taxable in the hands of employees, one of such kind is rent free accommodation (RFA) provided by the employer.

The Valuation of Perquisites of Rent Free Accommodation or accommodation at concessional rate can be easily understood with the help of the diagram given below –

Rent Free Accommodation , if the employer provides furniture also, then the amount to be added shall be 10% p.a. of the Cost of furniture ‘or’ Hire Charges as the case may be.

• In all the above cases the amount of perquisite shall be reduced by the amount of expenses reimbursed by the employee.
• For this purpose Salary means: Basic Salary + Dearness Allowance forming part of retirement benefits + Taxable allowances + Bonus + Commission + Any monetary payment paid by the employer but does not include employer’s contribution to Provident Fund and value of any perquisites.
• Salary is to be calculated on due basis, whether received from that employer or other employer.
• Where on account of the transfer of an employee from one place to another, he is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the value of perquisite shall be determined with reference to only one accommodation which has the lower value of a period not exceeding 90 days and thereafter the value of perquisite shall be changed for both the accommodation.
• While calculating the value of perquisite, any advance paid by the employer to the landlord shall not be taken into account nor can the same can be considered as a loan to the employee.