Employees living in company-provided homes can now look forward to more cash in hand. The government has reduced the valuation of this particular perquisite.
This was one of the crucial measures announced by Finance Minister P. Chidambaram while replying to the debate on the Finance Bill 2007-08, on Thursday. The bill was passed by the Lok Sabha.
Rent-free accommodation provided to employees is considered a perquisite. Although the accommodation is called “rent free”, there is a notional rent fixed by the government, which the employer may or may not deduct from the employee’s salary.
Until now this notional rent had been fixed at 15 per cent of salary, for those given company flats in cities with a population below 4 lakh, and 20 per cent in cities with higher populations.
This has now been reduced to 7.5 per cent of salary in cities with a population below 10 lakh; 10 per cent (population between 10 and 25 lakh); and 15 per cent in mega cities. “This will provide substantial relief, though the perquisite value works out be very high in case of those living in the metros,” said Sudhir Malik, a chartered accountant.