Rent-Free Accommodation Taxable Value FY 2026-27
Reviewed by CA Nikhil Gupta · Last reviewed 30 August 2026
Rent-free accommodation is a taxable salary perquisite.
For non-government employer-owned housing, the base value is 10%, 7.5% or 5% of salary depending on 2011 Census population; leased housing uses the lower of actual lease rent or 10% of salary, less employee rent.
For related guidance and tools, visit the Investing, Loans and Personal Finance — Complete Decision Hub.
Legal or Computational Framework
Governing rule
Government accommodation uses the licence-fee basis. Furnished housing adds 10% per year of furniture cost or actual hire charges. Hotel accommodation uses the special 24%-of-salary/actual-charge rule after the transfer-relief window.
Use the House Property Income Calculator — Annual Value and Interest to apply these points to your figures.
Correct calculation method
Identify employer category and accommodation type; compute Rule 3 salary for the occupancy period; apply city-population or lease formula; subtract employee rent; add furniture; apply transfer and hotel exceptions.
Step-by-step workflow
- Identify employer category and accommodation type.
- compute Rule 3 salary for the occupancy period.
- apply city-population or lease formula.
- subtract employee rent.
- add furniture.
- apply transfer and hotel exceptions.
Worked example
An employer leases a flat for ₹42,000 per month. Rule 3 salary is ₹3,60,000 for the occupancy period, so 10% is ₹36,000. The unfurnished perquisite is the lower ₹36,000, less employee recovery, not the full ₹42,000 rent.
The example is an illustration, not a substitute for the taxpayer's facts. A change in status, period, payment mode, document, city, asset, relationship or scheme can change the result.
Why generic pages get this wrong
Search pages often state a rate or limit without identifying the governing base. The calculation must distinguish gross receipt from taxable profit, tax from TDS, a deduction from an exemption, salary from business income, and an accounting entry from the tax treatment.
Decision matrix
| Decision point | Required treatment |
|---|---|
| Legal year | Use the Act, rules and notification effective for the income or transaction period |
| Taxpayer category | Confirm residence, age, entity, employee/business status and regime |
| Calculation base | Use the statutory definition rather than CTC, net bank receipt or accounting label |
| Ceiling or rate | Apply actual-amount, percentage, shared, lifetime and gross-income limits in sequence |
| Documentation | Link every input to an invoice, statement, contract, certificate or official record |
| Final output | Show tax, surcharge, cess, interest and TDS/TCS credits separately |
Entity and topical coverage
This page is written around the entities and concepts search engines expect for the topic: Rule 3, perquisite, rent-free accommodation, company car, salary. They are used only where relevant and are connected to the live calculator and knowledge hub rather than repeated mechanically.
What Generic Pages Miss
- Using annual salary instead of occupancy-period salary.
- Using obsolete perquisite rates.
- Ignoring employee recovery.
- Omitting furniture.
- Calling reimbursement exempt without evidence.
Practical Documentation Checklist
- Employment/lease agreement
- Salary definition working
- Occupancy dates
- Employee rent recovery
- Furniture cost/hire record
- Form 12BA
For the complete rules on this topic, see the core guide: Perquisites Taxation: Rent-Free Accommodation, Company Car & Other Benefits.
See the broader Income Tax & Salary knowledge hub for related rules and calculators on this topic.
Finin2min Summary
Rent-free accommodation is a taxable salary perquisite. For non-government employer-owned housing, the base value is 10%, 7.5% or 5% of salary depending on 2011 Census population; leased housing uses the lower of actual lease rent or 10% of salary, less employee rent.
Finin2min rule: establish eligibility, calculate transparently, and preserve an audit trail.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Page source links
- Income Tax Department — Salary guide: rent-free accommodation and motor car
- Income-tax Rules — Rule 3
- Income Tax Department — Perquisites overview
- Income Tax Department — Income Tax Returns FAQs under the 2025 Act
- Real Estate (Regulation and Development) Act, 2016
- State and UT RERA authorities
- Income-tax Act, 1961
Primary sources & related provisions
Statutory provisions referenced in this guide: