CAF-2 · Chapter 6 · Question 15 of 15
XYZ Ltd. owns a residential house and provides it as a rent-free accommodation to its Marketing Director. The fair market rent of the house is Rs. 1,200,000. Under the self-hiring rules, what is the tax implication for XYZ Ltd. (the employer) regarding this property?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) B) XYZ Ltd. will not be considered to have earned any rental income from this property, and there are no tax consequences for the employer.
Explanation
When an employer provides its own residential house to an employee rent-free, the fair market rent is added to the employee's taxable salary as a perquisite. However, the employer is not considered to have earned any rental income from the property, meaning there are no tax consequences for the employer.
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