HOUS­ING OP­TIONS FOR EX­PA­TRI­ATES IN INDIA

Mint Asia ST - - Inside - BVY IKAS VA SAL

India, be­ing an emerg­ing economy, has a large ex­pa­tri­ate pop­u­la­tion, which is in the coun­try ei­ther for em­ploy­ment or for busi­ness. For­eign­ers com­ing to India on busi­ness vis­its or on short-term and long-term sec­ond­ment/dep­u­ta­tion re­quire places to stay and con­sider them home un­til they leave the coun­try.

Peo­ple com­ing to the coun­try on short busi­ness vis­its gen­er­ally stay in ho­tels booked by them or guest houses ar­ranged by their hosts.

For salaried peo­ple, their In­dian as­sign­ments may vary from short vis­its to sec­ond­ment/dep­u­ta­tion for a short/long pe­riod rang­ing from six months to three years. Gen­er­ally, it’s the em­ployer’s re­spon­si­bil­ity to ar­range for board­ing and lodg­ing for its em­ploy­ees. An em­ployee may ei­ther be given rent-free ac­com­mo­da­tion (RFA) or paid a hous­ing al­lowance to meet their ex­pen­di­ture on rent.

RFA

RFA is ac­com­mo­da­tion pro­vided to an em­ployee by the em­ployer. The ac­com­mo­da­tion can be owned by the em­ployer, who can also give it to an em­ployee af­ter tak­ing it on lease/rent. RFA may be a fully fur­nished unit, hav­ing fur­ni­ture, fix­tures and gad­gets, or an un­fur­nished one.

Un­der In­dian tax laws, RFA pro­vided by an em­ployer to em­ploy­ees is con­sid­ered as a perquisite in the hands of the em­ploy­ees and taxed as in­come un­der the head ‘salary’. A room in a ho­tel pro­vided by an em­ployer to its em­ployee free of cost or at a con­ces­sional rate is also con­sid­ered a perquisite in the hands of the em­ployee.

There are spe­cific rules pre­scribed for val­u­a­tion of the RFA which are briefly as fol­lows:

Ac­com­mo­da­tion owned by em­ployer

Un­fur­nished: 15% of salary in cities hav­ing a pop­u­la­tion ex­ceed­ing 2.5 mil­lion

— 10% of salary in cities hav­ing a pop­u­la­tion ex­ceed­ing 1 mil­lion but not ex­ceed­ing 2.5 mil­lion

—7.5% of salary in other cases. Fur­nished: 15% of salary or the ac­tual amount of lease rental payable by the em­ployer, whichever is lower, as re­duced by any amount of rent paid by the em­ployee. In­creased by i) 10% of the cost of fur­ni­ture, ap­pli­ances and equip­ment, or

ii) where the fur­ni­ture, ap­pli­ances and equip­ment have been taken on hire, by the amount of ac­tual hire charges payable.

Any amount paid by the em­ployee would be re­duced.

Ac­com­mo­da­tion taken on lease by the em­ployer:

Un­fur­nished: 15% of the salary or the ac­tual amount of lease rental payable by the em­ployer, whichever is lower, as re­duced by any amount of rent paid by the em­ployee.

Fur­nished: 15% of ‘salary’ in cities hav­ing a pop­u­la­tion ex­ceed­ing 2.5 mil­lion

—10% of salary in cities hav­ing a pop­u­la­tion ex­ceed­ing 1 mil­lion but not ex­ceed­ing 2.5 mil­lion —7.5% of salary in other cases. In­creased by i) 10% of the cost of fur­ni­ture, ap­pli­ances and equip­ment, or

ii) where the fur­ni­ture, ap­pli­ances and equip­ment have been taken on hire, by the amount of ac­tual hire charges payable.

Any amount paid by the em­ployee would be re­duced.

Ac­com­mo­da­tion in a ho­tel:

24% of the salary or the ac­tual amount of lease rental payable by the em­ployer, whichever is lower, re­duced by any amount of rent paid by the em­ployee.

Ac­cord­ingly, an RFA has to be val­ued in ac­cor­dance with these rules based on the type of RFA men­tioned above. The re­sult is a perquisite in the hands of the em­ployee.

Hous­ing al­lowance

Another ar­range­ment for pro­vid­ing ac­com­mo­da­tion is to pay a hous­ing al­low- ance or house rent al­lowance (HRA) to the em­ployee. Un­der this sce­nario, ei­ther the em­ployer can take an ac­com­mo­da­tion on lease from a third party and pro­vide it to the em­ployee, who pays rent or the em­ployee can him­self/her­self take an ac­com­mo­da­tion on lease.

The amount of HRA is gen­er­ally 40-50% of the salary, de­pend­ing on where the house is taken.

Tax treat­ment: Peo­ple com­ing to India on short busi­ness vis­its gen­er­ally stay in ho­tels booked by them or guest houses ar­ranged by their hosts.

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