Value of perquisite where accommodation is provided in a hotel

In our last article, we discussed how to calculate the taxable value of perquisite where accommodation is provided by the employer. In this article, we will be discussing how to calculate the value of perquisite where accommodation is provided in a hotel by the employer.

For this purpose hotel includes licensed accommodation in the nature of motel, service apartment or guest house.

If the accommodation is provided in a hotel by the employer, then the value of the accommodation shall be the least of the following;

  • 24% of salary paid or payable for the previous year, or
  • the actual charges paid or payable to such hotel.

Value of perquisite will be calculated for the period during which such accommodation is provided.

If any amount has been collected or paid or payable, the value of perquisite as determined above shall be reduced by such amount. Balance amount shall be considered as taxable value of perquisite.

However, the value of perquisite shall be considered as nil if accommodation is provided in a hotel for a period not exceeding 15 days and it has been provided on the transfer of the employee from one place to another.

Meaning of salary

In the above calculation, we have discussed to take 24% of the salary while calculating perquisite. To calculate it we have to understand how to determine salary for this purpose.

Salary for this purpose includes the pay, allowance, 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 following, namely,-

  • dearness allowance unless it enters into the computation of superannuation or retirement benefits of the employee concerned;
  • Employer’s contribution to the provident fund account of the employees;
  • Allowances which are exempted from payment of tax;
  • The value of perquisite specified in section 17(2) of the income tax act,1961.
  • any payment or expenditure specifically excluded under proviso to sub clause (iii) of clause (2)(relating to employees stock option plan or scheme) or proviso to clause (2) of section 17 ( relating to medical facility or reimbursement of medical expenses);
  • Lump-sum payments received at the time of termination of service or superannuation or voluntary retirement like gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and similar payments.

Salary in this case computed in due basis for the period for which the rent free accommodation has been provided to the employee. For instance, if the rent free accommodation is provided for the period 1.4.2019 to 30.6.2019 then only the salary due for the months of April, may and June 2019 shall only be taken.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.