190. Rule 3(a)(i) of Income-tax Rules - Valuation of perquisite represented by rent-free residential accommodation in the case of Government employees - Effect of amendments made by Income-tax (Third Amendment) Rules, 1974
Circular No. 150 was issued by the Central Board of Direct Taxes on 19 November 1974. Its subject is 190. Rule 3(a)(i) of Income-tax Rules - Valuation of perquisite represented by rent-free residential accommodation in the case of Government employees - Effect of amendments made by Income-tax (Third Amendment) Rules, 1974.
This amends the Income-tax Rules. What it changes is the Rules, not the Act — and a rule can never take away what the section gives.
Explains the new basis for valuing furnished rent-free accommodation of Government employees. The Income-tax (Third Amendment) Rules, 1974, notified on 21 September 1974, substituted rule 3(a)(i), which covers persons holding an office or post in connection with the affairs of the Union or a State and Government officers lent to a body or undertaking under Government control who occupy accommodation allotted to that body by Government. For unfurnished accommodation the value stays as before — the rent that has been or would have been determined as payable under the Government's rules for allotment of residences. For furnished accommodation, that figure is first computed and then increased by 15 per cent of the original cost of the furniture provided by the employer, including television sets, radio sets, refrigerators, other household appliances and air-conditioning plant and equipment, or, where the furniture is hired, by the hire charges payable by the employer. The effect is that free furniture provided to all categories of salaried taxpayers is valued at 15 per cent of original cost, or the hire charges. The provision came into force on 21 September 1974 and applies for assessment year 1975-76 and later years, but had to be taken into account in deducting tax from salaries under section 192 during financial year 1974-75.
To explain the substituted sub-clause notified by the Income-tax (Third Amendment) Rules, 1974 and to tell disbursing officers to apply it in the current year's salary deductions.
190. Rule 3(a)(i) of Income-tax Rules - Valuation of perquisite represented by rent-free residential accommodation in the case of Government employees - Effect of amendments made by Income-tax (Third Amendment) Rules, 1974
1. The Income-tax (Third Amendment) Rules. 1974, notified by the Central Board of Direct Taxes on 21-9-1974, have substituted sub-clause (i) of clause (a) of rule 3 of the Income-tax Rules, relating to valuation of the perquisite represented by rent-free residential accommodation in the case of Government employees, etc., by a new sub-clause. The provisions of the new sub-clause are explained hereunder.
2. Under rule 3(a )(i), as it stood prior to the amendment made by the Income-tax (Third Amendment) Rules, 1974, the perquisite value of rent-free residential accommodation (whether furnished or unfurnished) provided to (a) persons holding an office or post in connection with the affairs of the Union or of a State, and (b ) officers of Government whose services have been lent to a body or undertaking under the control of Government (occupying residential accommodation allotted to the body or undertaking by the Government) was to be taken to be the rent which would have been determined as payable by the person in accordance with the rules framed by the Government for allotment of residences to its officers. Under the new provision, the perquisite value of rent-free residential accommodation in such cases will be determined as follows :
1. If the accommodation is unfurnished, the perquisite value of the accommodation will be determined on the same basis as adopted hitherto. The perquisite value will thus be taken to be an amount equal to the rent which has been or would have been determined as payable by the person concerned in accordance with the rules framed by the Government for allotment of residences to its officers.
2. If the accommodation is furnished, the value of the perquisite will first be computed in accordance with (1) above as if the accommodation was furnished; the amount so computed will then be increased by an amount equal to 15 per cent of the original cost of the furniture (including television sets, radio sets, refrigerators, other household appliances and air-conditioning plant and equipment, if any) provided by the employer. If the furniture is hired by the employer, the value of perquisite will, instead, be increased by the hire charges payable by the employer.
The effect of the new provision is that the perquisite value of free furniture (including television sets, radio sets, refrigerators, other household appliances and air-conditioning plant and equipment) provided to all categories of salaried taxpayers will be taken to be 15 per cent1 of the original cost of such furniture or, where the furniture is hired, the hire charges payable by the employer.
3. The new provision has come into force on 21-9-1974 and will, accordingly, apply for the assessment year 1975-76 and subsequent years. The new provisions will, however, have to be taken into account for the purposes of deducting income-tax on income chargeable under the head, "Salaries" under section 192 during the financial year 1974-75.
Circular : No. 150 [F. No. 142(46)/74-TPL], dated 19-11-1974.
In a salary assessment or a section 201 proceeding where the perquisite value of furnished Government accommodation is revised upwards.
An officer in furnished Government accommodation has a licence fee determined under the allotment rules of Rs. 3,000 for the year, and the employer's furniture, including a refrigerator and an air-conditioner, cost Rs. 20,000. The perquisite is Rs. 3,000 plus 15 per cent of Rs. 20,000, that is Rs. 3,000 plus Rs. 3,000, so Rs. 6,000. Had the furniture been hired, the hire charges payable by the employer would have been added instead of the Rs. 3,000.
Rules it names. Rule 3 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.