Taxation Exam > Taxation Notes > Income Tax for assessment (Inter Level) > Valuation of Accommodation and Education Facility - Taxation
Valuation of Accommodation and Education Facility - Taxation | Income Tax for assessment (Inter Level) PDF Download
Valuation of Accommodation to Private Employees
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Cities having a population (Latest Census) of | |
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upto 10 Lakhs |
more than 10 Lakhs & upto 25 Lakhs |
exceeds 25 Lakhs |
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Accommodation is owned by employer |
7.5% of Accommodation Salary is taxable |
10% of Accommodation Salary is taxable |
15% of Accommodation Salary is taxable |
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Accommodation is hired by employer |
‘Lease rent paid or payable’ or ‘15% of Accommodation Salary’ whichever is lower is taxable |
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P1: Compute value of accommodation from the following informations :
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Case 1 |
Case 2 |
Case 3 |
Case 4 |
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Accommodation is |
Owned |
Owned |
Owned |
Leased |
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City Population |
1,30,00,000 |
25,00,000 |
10,00,000 |
1,00,000 |
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Lease rental |
- |
- |
- |
10,000 |
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Accommodation’s Salary |
2,00,000 |
5,00,000 |
1,30,000 |
1,00,000 |
Ans: (1) 30,000; (2) 50,000; (3) 9,750; (4) 10,000
Salary for the purpose of accommodation (AS)
1. Accommodation’s salary is computed on due basis for the period during which accommodation is occupied
by employee.
E.g. Suppose employer provides accommodation on 15-6-2016, but accommodation is occupied by employee
from 1-8-2016. In this case salary shall be computed from 1-8-2016 upto the date of occupation. i.e.
upto 31-3-2017.
Since accommodation’s salary is computed on due basis therefore it shall not include advance salary and
arrears of salary which is increased with retrospective effect.
2. Accommodation’s salary: It includes Basic Salary + Dearness Allowance (should form part of salary for
computation of retirement benefit) + Commission (fixed or otherwise) + Bonus due for relevant previous year
+ all taxable allowances + any other monetary payment by whatever name called (Fees, encashed leave).
It excludes
(a) DA not forming part of salary.
(b) Perquisites as defined u/s 17(2) whether payable in terms of money or not.
(c) Employers’ contribution towards provident fund. However employee’s contribution towards PF is part
of AS.
As you know, bonus is taxable on receipt basis but for computation of accommodation’s salary bonus is taken
on due basis, therefore bonus due for the PY 2016-17 is included in accommodation’s salary, even where the
bonus is not received during the PY 2016-17.
P2: Accommodation is provided during the PY 2016-17. You are required to say whether following shall be
included in computing accommodation salary or not.
1. Basic Salary.
2. Dearness Allowance forming part of salary.
3. Dearness Allowance not forming part of salary.
4. Dearness Allowance (30% forming part of salary)
5. Commission based on sales.
6. Fixed commission.
7. Servant allowance.
8. Meal allowance.
9. Conveyance allowance for official purpose.
Salary for the purpose of accommodation (AS)
1. Accommodation’s salary is computed on due basis for the period during which accommodation is occupied
by employee.
E.g. Suppose employer provides accommodation on 15-6-2016, but accommodation is occupied by employee
from 1-8-2016. In this case salary shall be computed from 1-8-2016 upto the date of occupation. i.e.
upto 31-3-2017.
Since accommodation’s salary is computed on due basis therefore it shall not include advance salary and
arrears of salary which is increased with retrospective effect.
2. Accommodation’s salary: It includes Basic Salary + Dearness Allowance (should form part of salary for
computation of retirement benefit) + Commission (fixed or otherwise) + Bonus due for relevant previous year
+ all taxable allowances + any other monetary payment by whatever name called (Fees, encashed leave).
It excludes
(a) DA not forming part of salary.
(b) Perquisites as defined u/s 17(2) whether payable in terms of money or not.
(c) Employers’ contribution towards provident fund. However employee’s contribution towards PF is part
of AS.
As you know, bonus is taxable on receipt basis but for computation of accommodation’s salary bonus is taken
on due basis, therefore bonus due for the PY 2016-17 is included in accommodation’s salary, even where the
bonus is not received during the PY 2016-17.
P2: Accommodation is provided during the PY 2016-17. You are required to say whether following shall be
included in computing accommodation salary or not.
1. Basic Salary.
2. Dearness Allowance forming part of salary.
3. Dearness Allowance not forming part of salary.
4. Dearness Allowance (30% forming part of salary)
5. Commission based on sales.
6. Fixed commission.
7. Servant allowance.
8. Meal allowance.
9. Conveyance allowance for official purpose.
10. Travelling allowance for personal purpose.
11. Uniform allowance (60% spend for official purpose).
12. Children education allowance for 3 child. ₹ 150 p.m./child
13. Hostel allowance for 2 child ₹ 6,000.
14. Bonus due for the PY 2016-17 not yet received.
15. Bonus due for PY 2015-16 received in PY 2016-17.
16. Arrears of salary for the PY 2015-16 received in PY 2016-17.
17. Arrears of salary for the PY 2016-17 received in PY 2017-18.
18. Leave encashment.
19. Fees
20. Water facility.
21. Reimbursement of gas bills.
22. Employer’s contribution towards provident fund.
23. Employee’s contribution towards provident fund.
Ans: (1) Yes (2) Yes (3) No (4) 30% of DA forms part of accommodation salary (5) Yes
(6) Yes (7) Yes (8) Yes (9) No (10) Yes (11) 40% of uniform shall form part of accommodation salary (12)
₹ 3,000 (13) Nil (14) Yes (15) No (16) No (17) Yes (18) Yes (19) Yes (20) No (21) No. (22) No. (23) Yes.
P3: Following is the salary structure of Mr. Taxcrazy.
Basic Salary 7,000 p.m.
Dearness Allowance 1,000 p.m.
Transport Allowance 2,000 p.m.
Compute value of accommodation for the AY 2017-18 if
1. He is provided with accommodation at Delhi.
2. He is provided with accommodation at Gangtok. (population as per latest census 5 lakh).
3. He is provided with accommodation at Delhi w.e.f. 1-1-2017.
4. He is provided with accommodation at Delhi. Accommodation is taken on rent by employer. Lease rent
₹ 25,000 p.a. However employer could not pay rent of ₹ 5,000 for the relevant year.
5. He is provided with accommodation at Kohima. (population as per latest census 4 lakh). Accommodation is
taken on rent by employer. Lease rent ₹ 13,000 p.a. However employer paid ₹ 12,000 as lease rent for the
relevant year.
6. He is provided with accommodation at Delhi @ ₹ 400 p.m.
7. He is provided with accommodation from 1-12-2016. Accommodation is taken on rent by employer. Lease
rent ₹ 6,000 p.a.
8. He is provided with accommodation in Delhi from 1-1-2016. He resigns on 31-12-2016.
Ans: (1) 13,320; (2) 6,660; (3) 3,330; (4) 13,320; (5) 13,000; (6) 8,520; (7) 2,000. (8) 9,990
P4: X, who is working with LM Ltd. draws following emoluments. Compute Income from Salary.
Basic Salary 14,000 p.m.
Dearness Allowance (25% forms part of salary) 2,000 p.m.
Helper Allowance (75% is spent towards official purpose) 1,000 p.m.
Lunch Allowance (Expenditure on lunch is ₹ 1,000 p.m.) 900 p.m.
Children education allowance for 3 children 90 p.m./child
He has been provided unfurnished accommodation at Surat. Population 15 lakhs.
Ans: 2,25,768. [1,68,000+24,000+3,000+10,800+1,080+18,888=2,25,768] [AS : 1,68,000 + 25% of 24,000 +
3,000 + 10,800 + 1,080 = 1,88,880]
11. Uniform allowance (60% spend for official purpose).
12. Children education allowance for 3 child. ₹ 150 p.m./child
13. Hostel allowance for 2 child ₹ 6,000.
14. Bonus due for the PY 2016-17 not yet received.
15. Bonus due for PY 2015-16 received in PY 2016-17.
16. Arrears of salary for the PY 2015-16 received in PY 2016-17.
17. Arrears of salary for the PY 2016-17 received in PY 2017-18.
18. Leave encashment.
19. Fees
20. Water facility.
21. Reimbursement of gas bills.
22. Employer’s contribution towards provident fund.
23. Employee’s contribution towards provident fund.
Ans: (1) Yes (2) Yes (3) No (4) 30% of DA forms part of accommodation salary (5) Yes
(6) Yes (7) Yes (8) Yes (9) No (10) Yes (11) 40% of uniform shall form part of accommodation salary (12)
₹ 3,000 (13) Nil (14) Yes (15) No (16) No (17) Yes (18) Yes (19) Yes (20) No (21) No. (22) No. (23) Yes.
P3: Following is the salary structure of Mr. Taxcrazy.
Basic Salary 7,000 p.m.
Dearness Allowance 1,000 p.m.
Transport Allowance 2,000 p.m.
Compute value of accommodation for the AY 2017-18 if
1. He is provided with accommodation at Delhi.
2. He is provided with accommodation at Gangtok. (population as per latest census 5 lakh).
3. He is provided with accommodation at Delhi w.e.f. 1-1-2017.
4. He is provided with accommodation at Delhi. Accommodation is taken on rent by employer. Lease rent
₹ 25,000 p.a. However employer could not pay rent of ₹ 5,000 for the relevant year.
5. He is provided with accommodation at Kohima. (population as per latest census 4 lakh). Accommodation is
taken on rent by employer. Lease rent ₹ 13,000 p.a. However employer paid ₹ 12,000 as lease rent for the
relevant year.
6. He is provided with accommodation at Delhi @ ₹ 400 p.m.
7. He is provided with accommodation from 1-12-2016. Accommodation is taken on rent by employer. Lease
rent ₹ 6,000 p.a.
8. He is provided with accommodation in Delhi from 1-1-2016. He resigns on 31-12-2016.
Ans: (1) 13,320; (2) 6,660; (3) 3,330; (4) 13,320; (5) 13,000; (6) 8,520; (7) 2,000. (8) 9,990
P4: X, who is working with LM Ltd. draws following emoluments. Compute Income from Salary.
Basic Salary 14,000 p.m.
Dearness Allowance (25% forms part of salary) 2,000 p.m.
Helper Allowance (75% is spent towards official purpose) 1,000 p.m.
Lunch Allowance (Expenditure on lunch is ₹ 1,000 p.m.) 900 p.m.
Children education allowance for 3 children 90 p.m./child
He has been provided unfurnished accommodation at Surat. Population 15 lakhs.
Ans: 2,25,768. [1,68,000+24,000+3,000+10,800+1,080+18,888=2,25,768] [AS : 1,68,000 + 25% of 24,000 +
3,000 + 10,800 + 1,080 = 1,88,880]
P5: Mr. Taxcrazy, joins a company wef 1-6-2016 on following salary structure. Basic Salary ₹ 7,000
p.m. Dearness allowance ₹ 1,000 p.m. Meal allowance ₹ 200 p.m. Transport allowance ₹ 700 p.m.
On 1-8-2016 he is provided with furnished accommodation at Mumbai @ ₹ 200 p.m. Cost of furniture ₹ 6,00,000.
Compute Income from Salary for the AY 2017-18.
Ans: 1,29,040. [70,000+10,000+2,000+0+7,040+40,000=1,29,040] [AS =56,000+1,600=57,600. 15% of
57,600=8,640–1,600=7,040]
P6: Mr. Taxcrazy, retires from the company on 28-2-2017. His salary structure is following. Basic Salary
₹ 11,000 p.m. High cost of living allowance ₹ 1,000 p.m. Marriage allowance ₹ 500 p.m. Travelling
allowance for official purpose ₹ 80,000. On 1-1-2016 he is provided with furnished accommodation at Delhi
@ ₹ 300 p.m. Cost of furniture ₹ 80,000. He is also provided with rented furniture @ ₹ 20,000 p.m. Compute
Income from Salary for the AY 2017-18.
Ans: 3,82,158. [1,21,000+11,000+5,500+0+17,325+2,27,333=3,82,158] [1,21,000 + 11,000 + 5,500 = 1,37,500.
15% of 1,37,500 = 20,625 –3,300 = 17,325]
accommodation provided in a Hotel
Where the accommodation is provided in a hotel, taxable value of perquisite is lower of the following :
1. 24% of accommodation salary for the period during which such accommodation is provided in the PY; or
2. the actual charges paid or payable to such hotel for the period.
However, there will be no perquisite value if :
(a) Such accommodation is provided for a period not exceeding 15 days; and
(b) It has been provided on the transfer of the employee from one place to another.
Note 1 : Hotel includes licensed accommodation in the nature of motel, service apartment or guest house.
Note 2 : Where hotel accommodation is provided for more than 15 days, upto 15 days shall be exempted and
remaining days shall be taxable. This is applicable only when accommodation is provided on transfer of employee
from one city to another city.
P1: Compute income from salaries from the following informations.
p.m. Dearness allowance ₹ 1,000 p.m. Meal allowance ₹ 200 p.m. Transport allowance ₹ 700 p.m.
On 1-8-2016 he is provided with furnished accommodation at Mumbai @ ₹ 200 p.m. Cost of furniture ₹ 6,00,000.
Compute Income from Salary for the AY 2017-18.
Ans: 1,29,040. [70,000+10,000+2,000+0+7,040+40,000=1,29,040] [AS =56,000+1,600=57,600. 15% of
57,600=8,640–1,600=7,040]
P6: Mr. Taxcrazy, retires from the company on 28-2-2017. His salary structure is following. Basic Salary
₹ 11,000 p.m. High cost of living allowance ₹ 1,000 p.m. Marriage allowance ₹ 500 p.m. Travelling
allowance for official purpose ₹ 80,000. On 1-1-2016 he is provided with furnished accommodation at Delhi
@ ₹ 300 p.m. Cost of furniture ₹ 80,000. He is also provided with rented furniture @ ₹ 20,000 p.m. Compute
Income from Salary for the AY 2017-18.
Ans: 3,82,158. [1,21,000+11,000+5,500+0+17,325+2,27,333=3,82,158] [1,21,000 + 11,000 + 5,500 = 1,37,500.
15% of 1,37,500 = 20,625 –3,300 = 17,325]
accommodation provided in a Hotel
Where the accommodation is provided in a hotel, taxable value of perquisite is lower of the following :
1. 24% of accommodation salary for the period during which such accommodation is provided in the PY; or
2. the actual charges paid or payable to such hotel for the period.
However, there will be no perquisite value if :
(a) Such accommodation is provided for a period not exceeding 15 days; and
(b) It has been provided on the transfer of the employee from one place to another.
Note 1 : Hotel includes licensed accommodation in the nature of motel, service apartment or guest house.
Note 2 : Where hotel accommodation is provided for more than 15 days, upto 15 days shall be exempted and
remaining days shall be taxable. This is applicable only when accommodation is provided on transfer of employee
from one city to another city.
P1: Compute income from salaries from the following informations.
The document Valuation of Accommodation and Education Facility - Taxation | Income Tax for assessment (Inter Level) is a part of the Taxation Course Income Tax for assessment (Inter Level).
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FAQs on Valuation of Accommodation and Education Facility - Taxation - Income Tax for assessment (Inter Level)
| 1. What is the valuation process for an accommodation facility? |  |
Ans. The valuation process for an accommodation facility typically involves assessing the property's market value based on factors such as its location, size, amenities, and condition. Valuers use various methods, including the income approach, sales comparison approach, and cost approach, to determine the property's value.
| 2. How does taxation affect the valuation of an accommodation facility? | |
Ans. Taxation can impact the valuation of an accommodation facility in several ways. Property taxes are often calculated based on the property's assessed value, which can be influenced by its market value. Additionally, tax incentives or exemptions may be available for specific types of accommodation facilities, affecting their overall value.
| 3. What factors are considered in valuing an education facility? | |
Ans. Valuing an education facility involves considering factors such as the size of the facility, its location, condition, infrastructure, and any specialized amenities or features. Other factors like the reputation of the institution, enrollment numbers, and potential income from tuition fees may also be considered.
| 4. How does the valuation of an education facility differ from that of an accommodation facility? | |
Ans. The valuation of an education facility differs from that of an accommodation facility in terms of the factors considered. While both may consider location and condition, an education facility's value is often influenced by factors such as enrollment numbers, reputation, and potential income from tuition fees. On the other hand, accommodation facilities focus more on the property's market value and income potential from rentals.
| 5. Are there any tax incentives available for education facilities? | |
Ans. Yes, there may be tax incentives available for education facilities, depending on the jurisdiction and specific circumstances. These incentives can include exemptions or reductions in property taxes, grants or subsidies for educational programs or infrastructure development, and tax deductions for certain educational expenses. It is advisable to consult with tax professionals or local authorities to understand the specific incentives available in a particular area.
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