Direct Tax

August 2023

Amendment in Rule 3 Perquisite value of Rent-free/Concessional Residential Accommodation

∞ Recently, the Central Board of Direct Taxes in the Income Tax (Eighteenth Amendment), Rules, 2023 has amended Rule 3(1) of Income tax Rules, (“the Rules”) w.e.f. September 01, 2023 [Notification No. 65/2023/F. No. 370142/21/2023-TPL Part (1) dated August 18, 2023].

∞ The following changes are made in rule 3(1) for calculating perquisite value of rent-free/concessional residential accommodation w.e.f. September 01, 2023:

    i. Reduced valuation rates where unfurnished accommodation is owned by the employer:


    ii. Reduced valuation rate where unfurnished accommodation is taken on lease or rent by the employer:


    iii. In case of temporary accommodation provided to an employee working at a mining site / on-shore oil exploration site / project execution site / dam site / power generation site / off-shore site, the exemption limit is increased to an area not exceeding 1000 sq. ft., from existing 800 sq. ft.

    iv. Where accommodation (furnished or unfurnished) is owned by employer and is continued to be provided to the same employee for more than 1 previous year, the perquisite value for subsequent previous year (PY) shall be lower of:

        - Amount calculated as per i or ii, as the case may be; or

        - (Perquisite value calculated for first PY X CII for subsequent PY) / CII of PY in which accommodation was initially provided

        o CII refers to the index notified by the CG in the Official Gazette for the purposes of section 48

        o First PY corresponds to: - PY 2023-24; or - PY in which the accommodation was provided to the employee whichever is later.  

    v. For Government employees on deputation with another Government body or undertaking, such body/undertaking will be deemed to be the employer and perquisite value will be computed as per i.

    vi. Additionally, the definition of “remote area” is amended as under:


The above document is contributed by – Krupa Gandhi, Partner and Akta Shah, Senior Manager

[1] As per 2001 census
[2] As per 2011 census
[3] Of Salary 

Disclaimer: This document is intended to provide certain general information and should not be construed as professional advice. It should neither be regarded as comprehensive nor sufficient for the purposes of decision making. The firm does not take any responsibility for accuracy of the document nor undertakes any legal liability for any of the contents in this document. Without prior permission of the firm, this document may not be quoted in whole or in part or otherwise.