CBDT’s recent changes boost take-home pay for employees

The primary objective of this new rule is to offer financial relief to salaried individuals, providing them with more flexibility to meet their financial obligations and pursue their aspirations


The Central Board of Direct Taxes (CBDT) has come up with a new rule that will result in an increase in the net income of numerous employed individuals. These modifications pertaining to the housing facilities provided by companies to their staff without charge will be advantageous to the employees as it will increase their take-home pay. Naturally, these amendments, which took effect on 1 September, are being greeted with enthusiasm by the labour force.

The recent revisions in regulations have brought about a significant change in how companies evaluate accommodation provided to their employees, excluding those working for the central or state governments.

In particular, there has been a change in how the value of accommodation for employees living in company-owned unfurnished housing is determined. In metropolitan areas with a population of more than four million as per the 2011 census, the house rent allowance (HRA) calculation has been adjusted to 10 per cent of the employee’s salary. In the past, before the revision, HRA was set at 15 per cent of the salary for cities with a population of 2.5 million according to the 2001 census.

Now, for instance, if an employee is residing in a house provided by the company, the value of the accommodation will be assessed basis the updated formula, which will lead to a decreased valuation. As a result, this adjustment will lead to smaller deductions from the employee’s total income, ultimately resulting in the employees taking home a higher amount.

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