The 2023 Finance Law introduced a change for the purposes of calculating the “search” with regard to the value of free or subsidized housing provided to an employee by his employer. As a result, the CBDT amended Rule 3 of the Income Tax Rules 1961 to provide for the same.
Categorization and city and population limits were now based on the 2011 census as opposed to the previous 2001 census. The revised population limits are 40 lakh instead of 25 lakh and 15 lakh instead of 10 lakh. The previous rates of 15%, 10% and 7.5% of salary have now been reduced to 10%, 7.5% and 5% of salary respectively in the revised Rule. This is summarized as below:
|
Prior Categorization and Rates |
New classification and rates |
||
|
Population |
Search rate |
Population |
Search rate |
|
More than 25 lakhs |
15% |
More than 40 lakhs |
10% |
|
Between 10 lakhs and 25 lakhs |
10% |
Between 15 lakhs and 40 lakhs |
7.5% |
|
Less than 10 lakhs |
7.5% |
Less than 15 lakhs |
5% |
The Rule has also been further rationalized in order to calculate a fair taxation of the same accommodation occupied by an employee for more than a previous year.
Communication no. 65/2023 of 18th August 2023 was released and is available at https://egazette.nic.in.
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PPG/KMN
