## Valuation of Rent-Free Accommodation (RFA) [Rule 3(1)]
### General structure
| Particulars | Amount |
|---|---|
| Gross Value of Perquisite (see cases below) | XXXX |
| Less: Amount recovered from employee for accommodation/movable assets | (XXX) |
| Taxable Perquisite Value | XXXX |
### Meaning of 'Salary' for RFA valuation
Salary = Basic + DA (to the extent it forms part of retirement benefits) + Bonus + any Commission + taxable portion of allowances only.
It excludes: DA not for retirement benefits, employer's PF contribution, tax-exempt allowances, value of perquisites u/s 17(2), payments excluded under the 17(2) proviso, and lump-sum termination payments (gratuity, severance, leave encashment, commuted pension).
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### Case 1 — Accommodation provided by the Government
| Type | Perquisite value |
|---|---|
| Owned/rented by Government | License fee determined by the Government |
| Hotel accommodation | Lower of 24% of salary or actual rent. (If hotel provided for ≤ 15 days on account of transfer → NO perquisite.) |
Add: Furniture & appliances → 10% p.a. of original cost (if owned by employer), or actual rent (if hired).
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### Case 2 — Accommodation provided by any other (non-Government) employer
(a) Owned by employer — based on city population (2011 census):
| City population | Value |
|---|---|
| > 40,00,000 | 10% of salary |
| > 15,00,000 and ≤ 40,00,000 | 7.5% of salary |
| Other areas | 5% of salary |
(b) Rented by employer → Lower of (i) 10% of salary or (ii) actual rent paid.
(c) Hotel accommodation → Lower of (i) 24% of salary or (ii) actual rent. (≤ 15 days on transfer → exempt.)
Add: Furniture & appliances → same as Case 1.
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### Special situations
Accommodation on account of transfer (two houses retained):
- First 90 days → perquisite based on the lower value of the two accommodations.
- After 90 days → both accommodations charged.
Subsequent-year cap (non-Government employer, Case 2 only): if the same accommodation continues for more than one year, the value for subsequent years cannot exceed:
$$\text{Value in FPY} \times \frac{\text{CII of Current PY}}{\text{CII of First PY}}$$
where 'First Previous Year' = PY 2023-24 OR the PY in which accommodation was first provided, whichever is later.
Employee on deputation: where deputed to a body/undertaking controlled by Central/State Government, the deputation employer is treated as the actual employer, and value is computed as if accommodation is owned by the employer (Case 2 rules).
Judges: rent-free official residence to a High Court / Supreme Court judge is not taxable if they opt for the optional regime.