Under the Income-tax Act, 2025 read with the Income-tax Rules, 2026, the value of the perquisite of…

Under section 17(1)(a) of the Income-tax Act, 2025, the value of rent-free accommodation provided by the employer is a perquisite computed in the prescribed manner. Rule 15(2)(a), Table I, Sl. No. (1) of the Income-tax Rules, 2026 (formerly rule 3(1) of the Income-tax Rules, 1962) provides that, where unfurnished accommodation is provided by the Central Government or a State Government to its employees, its value is the licence fee determined by that Government in accordance with its rules, as reduced by the rent actually paid by the employee. Percentages of salary apply only to accommodation provided by other employers: for accommodation owned by such an employer, 10% of salary in cities with a population exceeding forty lakh (2011 census), 7.5% in cities exceeding fifteen lakh but not forty lakh, and 5% elsewhere. So 10% of salary is not the basis for Government employees, and 15% and 20% are not current rates.