Income Tax New Rule: In a significant development, the Income Tax Department has introduced a new rule that will lead to an increase in the take-home salary of many salaried employees in the country. The Central Board of Direct Taxes (CBDT) has recently issued a notification outlining changes related to rent-free accommodation provided by companies to their employees, which will have a positive impact on the in-hand salary of these individuals. These changes, effective from September 1, come as a welcome relief for the working class.
Under the revised rules, the valuation of accommodation provided by companies to employees, excluding central or state government employees, has been altered. Specifically, for employees residing in company-owned unfurnished accommodation, the valuation will now follow a different criterion. In urban areas with a population exceeding 40 lakh according to the 2011 census, the House Rent Allowance (HRA) will be calculated at 10 percent of the salary. This is a departure from the previous norm, where HRA equaled 15 percent of the salary in cities with a population of 25 lakh according to the 2001 census.
To illustrate the impact of this change, consider an employee residing in a company-provided house. The calculation for such accommodation will now be based on the new formula, resulting in a reduced rate. Consequently, there will be fewer deductions from the employee’s total salary. This, in turn, will lead to an increase in the in-hand salary of employees on a monthly basis.
Experts in the field suggest that while this change benefits employees by boosting their take-home pay and savings, it may also lead to a reduction in government revenue. The new rule aims to provide financial relief to the salaried class, offering them more disposable income to meet their financial needs and aspirations.
