VALUATION RULE CHANGED FOR RENT FREE ACCOMODATION (Reduced)

CBDT has issued a NOTIFICATION NO. 271/2007, DATED 7-11-2007,vide which rules for valuation of Rent Free/Less rent Accommodation(RFA) has been changed from 1.4.06 means rules are applicable for assessment year 2006-07.These rules are Beneficial to assessee as the valuation rate has been reduced for some categories of employees.These rules are inconformity with amendment made in finance act 2007 and removed the ambiguity regarding valuation of RFA .

After this amendment valuation of perquisites in respect of Rfa will be as under


valuation in case of accommodation provided by Center or State Government to employees:License fee determined by the Central Government or any State Government in respect of accommodation in accordance with the rules framed by such Government as reduced by the rent actually paid by the employee.
Valuation in case of accommodation provided by other employer:
if house owned by employer :

(i) 15% of salary in cities having population exceeding 25 lakhs as per 2001 census;

(ii) 10% of salary in cities having population exceeding 10 lakhs but not exceeding 25 lakhs as per 2001 census;

(iii) 7.5% of salary in other areas,
if house owned by employer:Actual amount of lease rental paid or payable by the employer or 15% of salary whichever is lower as reduced by the rent, if any, actually paid by the employee.
In both above cases if any rent paid by employee to employer will be reduced from valuation arrived as above.
In both case if furniture etc is also provided without rent than valuation of perquisites will be added by 10% of the cost of furniture provided.
In both the above cases if accommodation provided is a hotel than valuation of RFA will be 24 % of salary except in case of transfer and period in aggregate is not more than fifteen days.

so after the above change in rule valuation of RFA is reduced by 50 % in case of many employees from assessment year 2006-07.But here main problem is that they had already submitted their return for assessment year 2006-07 as well as 2007-08.

Don't worry evan if you have already filled your return ,you can file your revised return for assessment year 2006-07 & assessment year 2007-08 and can claim a refund for difference in tax due to less valuation of perquisites in respect of rent free accommodation.
you can revise your return in case you have filed your return in time.As you may aware of that belated return can not be revised.
For assessment year 2006-07 you can either file on saral return form or through e-filing.
For assessment year 2007-08 you can use new itr(as Applicable) or through e-filing.

complete notification can be downloaded from here
vauation of rent free accommodation (rule-3) (word document)
Note:In this notifiaction valuation of other perquisites has also been changed.