We had earlier released Tax Alert dated 21 August 2023 to explain Notification No. 65/2023 dated 18 August 2023 [1] issued by Central Board of Direct Taxes (CBDT) which substituted the existing Rule 3(1) (old rule) of Income Tax Rules, 1962 with the new Rule 3(1) (new rule) providing for valuation rules for accommodation perquisite.
In general, while the new rule continues to be largely based on the percentage of salary of the employee, however, it has rationalized the valuation in respect of employer-owned accommodation and also ensures that the increase in salary of the employee does not result in an artificial rise in the value of the perquisite beyond the inflation level in the country by way of introducing an inflation-linked cap in determining the value of perquisite.
CBDT has now issued a Corrigendum dated 29 August 2023 to amend the above referred Notification in respect of inflation linked capping to clarify that it will apply to both employer-owned and employer-leased accommodation.
We have accordingly updated Tax Alert dated 21 August 2023 to incorporate the change brought about by the Corrigendum
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