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Business News/ Companies / Housing options for expatriates in India
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Housing options for expatriates in India

Foreigners coming to India on business visits or on short-term and long-term secondment/deputation require places to stay. Here is a look at all residential options for expatriates

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

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 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.

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.

Another arrangement for providing accommodation is to pay a housing allowance 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.

FAQs:

1. Is an accommodation in a hotel always considered a perquisite in the hands of the employee?

An accommodation in a hotel is not considered a perquisite if it is provided to an employee for a period not exceeding in aggregate 15 days on his/her transfer from one place to another.

2. What does salary include and exclude for the purposes of RFA and HRA?

For RFA, the salary includes pay, allowances, bonus or commission payable monthly or otherwise, or any payment by whatever name it is called, excluding the following:

i.Dearness allowance, unless it enters into the computation of superannuation or retirement benefits

ii.Employer contribution to provident fund

iii.Exempt allowances

For HRA, the salary includes basic salary, dearness allowance and commission based on a fixed percentage of turnover achieved by an employee but excludes all other allowances and perquisites.

3.Can an expatriate take an accommodation on rent in India?

An expatriate can take an accommodation on rent in India after entering into a lease agreement with the owner of the property. An expatriate may also be required to get police verification done from the local police station.

Adityavikram S. Rathore contributed to this article.

Vikas Vasal is national leader-tax, Grant Thornton India LLP. You can send in your queries to vikas.vasal@in.gt.com

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Published: 15 Sep 2017, 12:42 AM IST
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