RFA (INCOME TAX)

1. Definition of Rent-Free Accommodation (RFA):

RFA is a perquisite provided by an employer to an employee, where the employee is allowed to reside in a house without paying rent or at a nominal rent.

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2. For Government Employees:

• The value of RFA is determined as per government rules (also referred to as the license fee).
• If the house is furnished:
  • Add 10% of the cost of furniture to the license fee, or
  • Use the actual higher charges, whichever is more.

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3. For Non-Government Employees:

The valuation depends on whether the employer owns or hires the accommodation:

A. If the Employer Owns the House:

• The percentage of the salary is determined based on:
  • The population of the city (as per the 2001 or 2011 census).
  • The date: Before or after 1st September 2023.

City Population	Perquisite Value (Before 1st Sep 2023)	Perquisite Value (After 1st Sep 2023)
Below 10,00,000	7.5% of salary	5% of salary
10,00,000 to 14,99,999	10% of salary	5% of salary
15,00,000 to 24,99,999	10% of salary	7.5% of salary
25,00,000 to 40,00,000	15% of salary	7.5% of salary
Above 40,00,000	15% of salary	10% of salary

B. If the Employer Hires the House:

• 15% of salary is considered before 1st September 2023.
• 10% of salary is used for calculations after 1st September 2023.

C. If the House is Furnished:

• Add 10% of the cost of furniture to the calculated value.

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4. Key Points to Remember:

• Salary includes basic pay, dearness allowance (if applicable for retirement benefits), and any other taxable allowances.
• The cost of furniture includes furniture, appliances, and fittings provided in the accommodation.

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Example 1: For a Government Employee

1. Details:

   • Basic Salary: ₹50,000 per month
   • DA (Dearness Allowance): ₹10,000 per month
   • Total Salary: ₹60,000 per month
   • License Fee as per government rules: ₹2,000 per month
   • Cost of furniture provided: ₹1,00,000

2. Calculation:

   • License Fee = ₹2,000/month
   • 10% of the cost of furniture = 10% of ₹1,00,000 = ₹10,000/year or ₹833/month
   • Total RFA Value = License Fee + Furniture Charges
     = ₹2,000 + ₹833 = ₹2,833 per month

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Example 2: For a Non-Government Employee (Owned Accommodation)

1. Details:

   • Basic Salary: ₹1,00,000 per month
   • DA (Retirement benefit eligible): ₹20,000 per month
   • Total Salary: ₹1,20,000 per month
   • City Population: 30 lakh (2011 Census, falls in 25,00,000 to 40,00,000 category)
   • Furnished House: Furniture cost = ₹2,50,000

2. Calculation:

   • Perquisite Value (After 1st September 2023):
     7.5% of salary = 7.5% of ₹1,20,000 = ₹9,000 per month.
   • Add 10% of the cost of furniture:
     10% of ₹2,50,000 = ₹25,000/year or ₹2,083/month.
   • Total RFA Value = ₹9,000 + ₹2,083 = ₹11,083 per month

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Example 3: For a Non-Government Employee (Hired Accommodation)

1. Details:

   • Basic Salary: ₹80,000 per month
   • DA: ₹20,000 per month
   • Total Salary: ₹1,00,000 per month
   • House Rent paid by employer: ₹15,000 per month
   • Furnished House: Furniture cost = ₹50,000

2. Calculation:

   • Perquisite Value (After 1st September 2023):
     10% of salary = 10% of ₹1,00,000 = ₹10,000 per month.
   • Add 10% of the cost of furniture:
     10% of ₹50,000 = ₹5,000/year or ₹417/month.
   • Total RFA Value = ₹10,000 + ₹417 = ₹10,417 per month

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Key Notes:

• For non-government employees, the calculation changes depending on whether the accommodation is owned or hired by the employer.
• For furnished accommodations, always add 10% of the furniture cost to the calculated RFA value.
• Always use the census population and date-based rules for accurate calculations.