While it isn’t unprecedented for employers to give or provide accommodation that is free or at concessional lease, to their representatives, Income Tax laws collect taxes on such offices, contingent upon their valuation.
Because of the lack of available accommodation and so as to draw on the talent pool, numerous employers to give accommodation that is free or at concessional lease, to their workers. This is especially valid, if the companies are located in remote spots, where an individual is generally not willing to shift to, unless the proper accommodation is provided to him. The employer, once in a while gives the facility of a gardener, sweeper, and so on, at the accommodation given to the employees. These amenities given by an employer, are not tax-free in the hands of an employee. The tax laws have provisions for esteeming such facilities, which are named as ‘perquisites’ in income tax parlance. Let us now examine how this is done.
It is fascinating to take note that these facilities, wind up taxable in the hands of the employees, not just when they are given to the workers, yet in addition, when such facilities are given to any of the members of the worker’s family. With the purpose of tax collection of provision of accommodation, the members of the family incorporates the life partner, kids and parents, just as life partners of the kids, workers and wards of the representative. In this way, any free convenience given to the parents of a worker, even at a place other than where the employee is working, will likewise turn into a perquisite and in this manner, wind up taxable. Accommodation for this purpose shall comprise, not only the residential house, but also a farm house, hotel, service apartment and guest houses.
Importantly, such services are taxable when they are provided to the employee not only directly by the employer, but also indirectly to him, due the reason of his employment. So, an accommodation provided to an employee of a company other than his employer, is also taxable in the hands of the employee.
For Central and State Government Employee
The tax laws provide different treatment to these facilities, depending on whether the employee is a government employee or not and also depending on whether he is a central government or state government employee. For government employees, the value of such a perquisite shall be the license fee as is already fixed for such accommodation by the state and central government respectively, if the accommodation is provided free to the employee. However, if any rent is recovered from the employee of the government, the taxable privilege shall be decreased to the extent of the rent recovered. The same shall apply, if the accommodation provided, is owned by the employer or is taken on rent from a third party.
For Non-Government Employees
The evaluation of the perquisite for accommodation that is given to an individual who is not a government employee would rely upon whether the accommodation is owned by the employer or is taken on rent. If the accommodation is taken on rent, the actual cost earned from the employer for such accommodation, subject to a maximum of 15 % of the salary as reduced by the rent, shall be treated as the value of the perquisite. However, if the accommodation is owned by the employer, the valuation of such perquisites will depend on the population of the place of accommodation.
Why should you invest in a guest house?
The more an employer takes care of their employee, the more the employer gain from it. Investing in a guest house id taxable, but paying taxes without actually staying is utter foolishness when you can accommodate your employees in them, you are in double gain. Providing accommodation, guest house, villas or apartments, to the employees helps employee gain the trust and loyalty. Hence, an employer or company should be investing in the guest house as it is definitely a win-win situation for the employer.