The government had repealed Fringe Benefit Tax (FBT) during the current financial year and specified that new perquisite rules would be notified. After much wait, the new perquisite rules have now been notified this month, which are effective retrospectively from April 1, 2009.

Nevertheless, the following points merit attention:

Unfurnished accommodation

In case of central and state government employees, the perquisite value is to be determined as per the licence fee specified by the government. For government employees, on deputation with anybody or undertaking, the perquisite value is to be determined by treating such a body or undertaking as the employer as below. In case of non-government employees, the perquisite valuation for unfurnished rent-free accommodation (RFA) is to be determined as lease rent paid by employer or specified per cent of salary, whichever is lower.

Furnished accommodation

The value of the perquisite determined in case of unfurnished accommodation as above, is to be increased by 10% per annum of the cost of furniture (including television, radio, refrigerator, other household appliances, air-conditioners, etc), if such furniture is owned by the employer or the actual hire charges paid by the employer, as the case may be.

Hotel accommodation

If the accommodation is provided by the employer in a hotel, then perquisite value is to be determined as 24% of the salary paid or payable or actual hotel charges paid by the employer, whichever is lower, for the period during, which such accommodation is provided to the employee. It is pertinent to note that in case of transfer of employee from one place to another, if the hotel accommodation is provided for a period not exceeding 15 days, there would be no perquisite value.

Transfer - two accommodations

In case of transfer, where an employee moves from one place to another and is provided accommodation at the new place of posting while he retains his earlier accommodation, the value of perquisite is to be determined with reference to the only one such accommodation, which is the lower in value up to a period not exceeding 90 days. Afterwards, the value of the perquisite is to be determined for both the accommodations and taxed accordingly.

Remote location

In case of accommodation provided to the employee working at a mining or an on-shore oil exploration site, or execution site, or a dam site, or a power generation, or an off-shore site which is of temporary nature and having plinth not exceeding 800m and is located not less than 8 km away from the local limits of any municipality, etc; or is located in a remote area, then no perquisite value needs to be determined for taxation purposes.

Comparison with HRA

As far as HRA is concerned, the taxable benefit is to be determined as HRA received by the employee as reduced by the least of the following: the allowance actually received; or rent paid in excess of 10% of salary; or 50% of salary (40% of salary in case of cities other than Mumbai, Kolkata, Delhi or Chennai).

Therefore, given an option to choose between RFA and HRA, an employee may like to do a back-of-the-envelope calculation to see which one is more beneficial, keeping in mind his requirements, salary level, perquisite value and the tax impact. This planning may be more fruitful for the next financial year.