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The Centre has lowered the tax on company housing, giving some relief to lakhs of employees using accommodation provided by non-government employers.

This year’s budget had proposed to treat as notional rent 20 per cent of the salary of those living in company houses and impose income-tax on the amount. The tax covers employees in the private and public sectors but not government staff.

Employees in small mining and steel towns in eastern India were the worst hit as living in company houses is unavoidable in remote locations. They would have had to shell out a substantial amount as the tax was imposed with retrospective effect from 2005.

Today, while replying to the debate on the budget, finance minister P. Chidambaram announced a scaled-down, graded system of notional tax.

The notional rent on most company housing will now be taken at 7.5 per cent of the salary. The notional rent in towns with a population of more than 1 million but less than 2.5 million will be worked out at 10 per cent of the salary. For those living in cities with more than 2.5 million people, it will be 15 per cent of the salary.

Since the changes will also be retrospective from 2005, the arrears tax burden will go down substantially.

source:Telegraph India