What is rent free accommodation

RFA or rent free accommodation is an arrangement where the employer gives the employee a residence to put up at without charging any rent. Sometimes, the cost of accommodation can also be at a concessional rate. This facility is offered by many employers to the employees in return for their services and expertise. It is also considered as an additional benefit in the form of kind. 

Rent free accommodation is of two types-

• Furnished accommodation

• Unfurnished accommodation

The RFA attracts taxes according to the Income Tax Department of India. If the house is furnished then the taxability will be as follows:

In case the house is unfurnished then the taxability will be as follows:

• For government employees:

  Licence fee will be taxable

• For other employees:

  if the house is owned by the employer and is valued up to Rs. 10 lakhs then 7.5% of salary will be taxable (Rs. 10 lakh to Rs. 25 lakhs - 10% of salary, more than Rs. 25 lakhs - 15% of salary)

In case the stay is for up to 15 days in case of transfer of the employee from one place to another then the taxability will be as follows:

• Unfurnished :

  No taxability 

• Furnished:

  actual charges paid to hotel or 24% of salary

I hope now you have an idea about what is rent free Accommodation meaning clearly.

Hi there Shikhar,

As fancy and luring as it sounds, rent free accommodation is a form of reward every employee wishes to receive. I have been lucky enough to receive RFA from my previous employer. So, I know quite a lot about RFA or accommodation free through employers to employees. And I am going to take this opportunity to make the readers here understand what RFA is with the help of my personal experience. So, read on.

RFA refers to a residence supplied by your employer for your personal use. Some employees receive free housing from their employers, while others may be charged to some extent. In a nutshell, RFA is a type of perquisite that is regarded as an additional benefit obtained in kind from your employer and is taxable under the requirements of the Income Tax Act.

Perquisites are a significant part of income from salary. Rent-free housing is one of the key benefits provided to employees (RFA). It refers to a place of abode provided by an employer to an employee. RFA can be provided for free or at a discounted price. Here accommodation can mean any of the following;

1. Hotel

2. A flat

3. Service apartment

4. Guest House

5. Farm House or part thereof

6. Mobile home

7. Caravan

8. Ship or other floating structures

Accommodation provided by an employer to an employee is divided into two groups for the purposes of tax computation. These are

1. Employees of the Central and State governments are supplied with the housing.

2. Accommodation for individuals who receive a salary but are not employed by the central or state governments.

As already mentioned by Mr. Nimish, these categories can be further divided into;

• Rent free furnished accommodation

• Rent free unfurnished accommodation

When computing tax on rent-free housing, if an employee earns income or pays from numerous companies but only one of them provides housing, the total income earned by the employee from all of his or her employers will be taken into account.

I hope now you are also well versed about the various aspects of rent accommodation free and how they are taxable. I hope you get an RFA from your employer too and then we can discuss it together.