New Delhi: The Central Board of Direct Tax (CBDT) announced on Saturday that it is amending the way of calculating the ‘perquisite’ value associated with rent-free or concessional living spaces provided by employers to employees.  CBDT notified that the The Finance Act, 2023 brought the amendment for modification of Rule 3 of the Income-tax Rules, 1961.


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The new rules will provide a major relief to top management players or high salaried employees in corporate as their take home salary will increase.


The amendment of the Income Tax Rule will come to effect from September 1, 2023.  


The notification says that the categories and the limits of cities and population, which determines the ‘perquisite’ value of rent-free or concessional accommodation, have now been based on the 2011 census against the 2001 census earlier.


New categorisation and rates for 'perquisite' value of rent-free Accommodation:


Previous Categorisation and Rates   New Categorisation and Rates  
Population Perquisite Rate Population Perquisite Rate
More than 25 lakh 15% More than 40 lakh 10%
Between 10 lakh and 25 lakh 10% Between 15 lakh and 40 lakh 7.5%
Less than 10 lakh 7.5% Less than 15 lakh 5%


The Rule has also been further rationalised so as to compute a fair tax implication of the same accommodation being occupied by an employee for more than one previous year.