Are you looking for accommodation in India? Do you want to rent an apartment or does your employer offer you a company-leased residence? Which option would work better for you?
Today many organizations provide company-leased accommodation to their employees as a part of their compensation package. This is largely due to the fact that company personnel are deputed during their employment, to different places for short durations. Having accommodation ready for employees at new destinations helps them settle down faster. Employees do not have to go through the trouble of searching for rental properties, inquiring about the neighborhood, finding a lawyer to draw up and register an agreement, and all the other rigmarole involved in finding a place to stay. An employee may also get a company-leased accommodation due to his/her designation.
When the company extends accommodation facilities to its employees, it generally bears the expenses on the stamp paper, registration, broker’s fees, security deposit and other costs.
For tax purposes, a company-leased apartment is treated as a ‘perquisite’. The value of such a perquisite is considered a part of the salary. The value of the accommodation is calculated as the lower figure between ’ten percent of the employee’s salary’ and ‘the actual rent paid by the employer’. In cases where the employer provides furnished accommodation, the perquisite is calculated at ‘the value of the unfurnished accommodation’ plus ‘ten percent per year of the cost of the furniture’. If the furniture is also taken on lease, then the value of the perquisite is determined as ‘the value of unfurnished accommodation’ plus ‘the rental paid for furniture’.
If, on the other hand, you choose to rent an apartment yourself without involving your employer, you would have to bear the initial costs like the registration fees, stamp duty, broker’s fees and security deposit. What would the tax implications be in such a case? Your salary includes certain components, HRA or House Rent Allowance being one of them. If you pay rent on your accommodation, then you are entitled to a tax exemption on the HRA. The exemption is the lowest figure between: ‘the actual HRA received’, ‘the actual rent paid over ten percent of your salary’ and ‘forty percent of salary (fifty percent in Mumbai, Calcutta, Chennai and Delhi)’.
Before deciding on whether you want to rent an apartment or opt for a company-lease arrangement, take the time to calculate which option would be most cost-effective for you.
Are you living in a rental apartment or a company-leased residence? Why did you choose this option? What are the advantages you enjoy?