Taxation - DT Ch 03: Salaries - Test 2: answer key

Question 1 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. Vikramaditya Tech Labs LLP provides Mr. Rohan Malhotra, its Chief Financial Officer, with residential accommodation owned by the LLP in a city having a population of 28 lakh as per the 2011 census. Rohan occupies the accommodation from 1 July 2026 to 31 March 2027. The accommodation is initially unfurnished. On 1 December 2026, the LLP also provides furniture purchased at a cost of ₹4,80,000. Rohan is required to pay monthly rent of ₹8,000 to the LLP throughout his occupation. His remuneration for the nine-month occupation period comprises basic salary of ₹1,00,000 per month, dearness allowance of ₹20,000 per month, and city compensatory allowance of ₹5,000 per month. The terms of employment provide that 50% of DA forms part of salary for retirement benefits. He also receives a performance bonus of ₹60,000 in December 2026, relating entirely to services rendered during the accommodation period. The LLP contributes ₹12,000 per month to his recognised provident fund account. The contribution is not included in the salary computation for valuing accommodation. The HR department proposes to value the accommodation at 10% of salary because Rohan is a senior executive. Another payroll executive suggests that the employee's monthly rent contribution should be deducted before determining the furniture component. The company seeks advice on the correct treatment under the applicable accommodation valuation rules. Assume that no other accommodation, allowance exemption or perquisite affects the computation, and that the stated rent recovery is made throughout the nine-month occupation period.

Calculate the salary figure to be considered for valuation of Rohan's accommodation for the nine-month occupation period, after applying the prescribed inclusions and exclusions.

1. ₹10,05,000
2. ₹11,25,000
3. ₹10,95,000 (correct answer)
4. ₹11,55,000

Answer: C — ₹10,95,000

Explanation. Salary includes basic pay, taxable allowances, bonus and eligible DA, but excludes DA not forming part of retirement benefits and employer contributions to recognised provident fund. Basic salary = ₹1,00,000 × 9 = ₹9,00,000. Eligible DA = ₹20,000 × 50% × 9 = ₹90,000. City compensatory allowance = ₹5,000 × 9 = ₹45,000. Bonus = ₹60,000. Total salary = ₹9,00,000 + ₹90,000 + ₹45,000 + ₹60,000 = ₹10,95,000.

Where it goes wrong. Including the entire DA or employer's provident fund contribution in the accommodation salary base.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 2 · 2 marks · Taxation - DT Ch 03: Salaries · medium

The residential accommodation is situated in a city having a population of 28 lakh as per the 2011 census. What is the unfurnished accommodation value before deducting rent paid by Rohan?

1. ₹82,125 (correct answer)
2. ₹1,09,500
3. ₹54,750
4. ₹90,000

Answer: A — ₹82,125

Explanation. The city population of 28 lakh falls within the slab exceeding 15 lakh but not exceeding 40 lakh, as per the 2011 census. The prescribed percentage for employer-owned accommodation is 7.5% of salary. Salary calculated in question 1 is ₹10,95,000. Therefore, the unfurnished accommodation value is ₹10,95,000 × 7.5% = ₹82,125. Rohan's rent contribution is not deducted at this stage because the question asks for the value before employee rent recovery.

Where it goes wrong. Applying the 10% slab applicable to cities exceeding 40 lakh population merely because the employer provides accommodation to a senior executive.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 3 · 2 marks · Taxation - DT Ch 03: Salaries · hard

The LLP provided furniture costing ₹4,80,000 from 1 December 2026. Calculate the additional annualised furniture value attributable to the four-month period ending 31 March 2027.

1. ₹12,000
2. ₹48,000
3. ₹24,000
4. ₹16,000 (correct answer)

Answer: D — ₹16,000

Explanation. Where furniture is owned by the employer, the accommodation value is increased by 10% per annum of its cost. Furniture is provided from 1 December 2026, so it is available for four months during the tax year. Annual furniture value = ₹4,80,000 × 10% = ₹48,000. Value attributable to four months = ₹48,000 × 4/12 = ₹16,000. This amount is added to the accommodation value calculated before considering employee rent recovery.

Where it goes wrong. Charging a full year's furniture value despite the furniture being provided only for four months.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 4 · 2 marks · Taxation - DT Ch 03: Salaries · hard

After including the furniture component, determine the taxable value of Rohan's furnished accommodation for the nine-month period, after deducting rent actually paid by him.

1. ₹82,125
2. ₹26,125 (correct answer)
3. ₹98,125
4. ₹54,125

Answer: B — ₹26,125

Explanation. Unfurnished accommodation value = 7.5% of ₹10,95,000 = ₹82,125. Furniture value = ₹16,000. Furnished accommodation value before recovery = ₹82,125 + ₹16,000 = ₹98,125. Rent paid by Rohan = ₹8,000 × 9 = ₹72,000. Taxable perquisite = ₹98,125 − ₹72,000 = ₹26,125. Rent recovery is deducted from the aggregate furnished accommodation value, not merely from the furniture component.

Where it goes wrong. Deducting rent recovered from the basic accommodation value before adding furniture and thereby omitting part of the taxable benefit.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 5 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. Nandini Real Estates Pvt. Ltd. appoints Mr. Devansh Kapoor as its regional business head. From 1 October 2026, the company arranges an apartment for him in Jaipur by taking it on lease from an independent property owner. The employer pays lease rent of ₹80,000 per month for the six months ending 31 March 2027. Devansh contributes ₹4,000 per month towards the accommodation, recovered directly from his monthly salary. His remuneration for the six-month period consists of basic salary of ₹90,000 per month, dearness allowance of ₹25,000 per month, and project allowance of ₹15,000 per month. Under the employment contract, 40% of DA forms part of salary for retirement benefits. A bonus of ₹60,000 is paid in January 2027 and relates entirely to the six-month service period. The employer also contributes ₹12,000 per month to his recognised provident fund account. The apartment is initially unfurnished. The employer hires furniture from an external furnishing agency at ₹10,000 per month for the entire six-month period. Devansh is separately required to contribute ₹2,000 per month towards furniture hire charges. The payroll department proposes to apply 10% of the accommodation salary as the only perquisite, while the finance manager believes the full lease rent must be considered. Devansh has not paid any additional amount towards the accommodation or furniture. Determine the correct valuation by treating the residential accommodation and furniture separately and then combining their values. Assume the entire stated bonus is payable for the period of occupation and there are no other salary adjustments.

Determine Devansh's salary for accommodation valuation for the six-month occupation period. Consider eligible DA, project allowance, bonus and the specific exclusions prescribed for this valuation.

1. ₹7,50,000 (correct answer)
2. ₹6,90,000
3. ₹8,10,000
4. ₹6,30,000

Answer: A — ₹7,50,000

Explanation. Basic salary = ₹90,000 × 6 = ₹5,40,000. Eligible DA = ₹25,000 × 40% × 6 = ₹60,000. Project allowance = ₹15,000 × 6 = ₹90,000. Bonus = ₹60,000. Total salary for valuation = ₹5,40,000 + ₹60,000 + ₹90,000 + ₹60,000 = ₹7,50,000. Employer's provident fund contribution of ₹72,000 is excluded from salary for accommodation valuation.

Where it goes wrong. Including the employer's provident fund contribution or excluding a bonus merely because it is paid once rather than monthly.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 6 · 2 marks · Taxation - DT Ch 03: Salaries · hard

The company has taken the apartment on lease for six months. Lease rent is ₹80,000 per month, while salary for accommodation valuation is ₹7,50,000. Devansh pays ₹4,000 per month towards accommodation. Calculate the perquisite value of the unfurnished accommodation.

1. ₹75,000
2. ₹24,000
3. ₹51,000 (correct answer)
4. ₹96,000

Answer: C — ₹51,000

Explanation. For employer-leased accommodation, the value is the lower of actual lease rent and 10% of salary, reduced by rent recovered from the employee. Lease rent for six months = ₹80,000 × 6 = ₹4,80,000. Ten per cent of salary = ₹7,50,000 × 10% = ₹75,000. The lower value is ₹75,000. Employee contribution = ₹4,000 × 6 = ₹24,000. Perquisite = ₹75,000 − ₹24,000 = ₹51,000.

Where it goes wrong. Taking the lower of the monthly lease rent and salary percentage without first calculating the respective values for the entire occupation period.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 7 · 2 marks · Taxation - DT Ch 03: Salaries · hard

The company hires furniture from an external agency at ₹10,000 per month for six months. Devansh contributes ₹2,000 per month towards furniture hire charges. What is the furniture-related perquisite value to be added to the accommodation value?

1. ₹60,000
2. ₹48,000 (correct answer)
3. ₹36,000
4. ₹12,000

Answer: B — ₹48,000

Explanation. Where furniture is hired from a third party, the furniture component is based on actual hire charges payable by the employer, reduced by the amount paid by the employee. Employer's hire charges = ₹10,000 × 6 = ₹60,000. Devansh's contribution = ₹2,000 × 6 = ₹12,000. Therefore, furniture perquisite = ₹60,000 − ₹12,000 = ₹48,000. This amount is added separately to the value of the residential accommodation.

Where it goes wrong. Applying 10% of furniture cost when the furniture is hired from an external agency rather than owned by the employer.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 8 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Compute the aggregate perquisite value of Devansh's accommodation and furniture for the six-month period from October 2026 to March 2027.

1. ₹75,000
2. ₹84,000
3. ₹1,11,000
4. ₹99,000 (correct answer)

Answer: D — ₹99,000

Explanation. Unfurnished leased accommodation value is ₹51,000, calculated as the lower of ₹4,80,000 lease rent and ₹75,000 salary-based value, less ₹24,000 recovered from Devansh. Furniture value is ₹48,000, being ₹60,000 employer hire charges less ₹12,000 recovered. Aggregate accommodation perquisite = ₹51,000 + ₹48,000 = ₹99,000. Both employee contributions must be deducted from their respective components.

Where it goes wrong. Deducting the employee's total contribution twice or omitting the separately valued hired furniture component.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 9 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. Smt. Anuradha Sen is a senior officer of a State Government department. She is transferred from Chennai to Hyderabad with effect from 11 September 2026. On arrival, the department arranges accommodation for her in a hotel from 11 September to 30 September 2026, comprising 20 days. The hotel charges the department ₹4,000 per day, and Anuradha does not make any payment towards the hotel expenses. Her monthly salary for the purpose of accommodation valuation is ₹1,50,000. From 1 October 2026, Anuradha is allotted Government residential accommodation at Hyderabad. The licence fee determined under the applicable Government rules is ₹18,000 per month. She pays ₹7,000 per month towards occupation of this residence. The quarter is furnished from the date of allotment with furniture owned by the department, purchased at a cost of ₹4,80,000. The accommodation and furniture are provided continuously from 1 October 2026 to 31 March 2027. The department does not recover any separate furniture charges. The accounts section is considering three approaches: valuing the Government residence using the population-based percentages applicable to private employers, valuing the hotel stay at the full hotel charges, and treating the first 15 days of every hotel stay as exempt even where the aggregate transfer-related stay exceeds 15 days. Anuradha requests a computation covering the hotel stay, Government accommodation and furniture separately. Assume that the licence fee remains unchanged and that no additional rent or other recovery is made during the relevant periods.

Determine the value of Anuradha's unfurnished Government accommodation for six months, after deducting the rent paid by her. Which valuation method is applicable?

1. ₹1,08,000, using 10% of salary.
2. ₹66,000, using Government licence fee. (correct answer)
3. ₹90,000, using 7.5% of salary.
4. ₹1,32,000, using 12.5% of salary.

Answer: B — ₹66,000, using Government licence fee.

Explanation. For Government employees, the unfurnished accommodation value is based on the licence fee determined under Government rules, reduced by rent actually paid by the employee. Licence fee = ₹18,000 × 6 = ₹1,08,000. Employee rent payment = ₹7,000 × 6 = ₹42,000. Taxable value = ₹1,08,000 − ₹42,000 = ₹66,000. Population-based percentages applicable to non-Government employers are not used for this category.

Where it goes wrong. Applying the employer-owned private accommodation population slabs to an employee occupying Government accommodation.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 10 · 2 marks · Taxation - DT Ch 03: Salaries · hard

The Government quarter is furnished from 1 October 2026 with furniture owned by the department costing ₹4,80,000. Determine the additional furniture value for the six-month occupation period.

1. ₹24,000 (correct answer)
2. ₹48,000
3. ₹12,000
4. ₹30,000

Answer: A — ₹24,000

Explanation. For furnished Government accommodation, the unfurnished accommodation value is increased by 10% per annum of the cost of furniture. Furniture cost is ₹4,80,000 and the period of provision is six months. Annual value = ₹4,80,000 × 10% = ₹48,000. The value for six months is ₹48,000 × 6/12 = ₹24,000. As the department owns the furniture, actual third-party hiring charges are not relevant.

Where it goes wrong. Applying the 10% rate to the Government licence fee instead of applying it to the cost of furniture.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 11 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Anuradha's hotel stay on transfer lasted 20 days. The hotel charges ₹4,000 per day, while her monthly salary for accommodation valuation is ₹1,50,000. Determine the hotel accommodation perquisite value for the 20-day period.

1. ₹80,000
2. ₹40,000
3. ₹30,000
4. ₹24,000 (correct answer)

Answer: D — ₹24,000

Explanation. For hotel accommodation, the value is the lower of 24% of salary for the period or the actual hotel charges, reduced by rent paid by the employee. Salary for 20 days, assuming a 30-day month, is ₹1,50,000 × 20/30 = ₹1,00,000. Twenty-four per cent is ₹24,000. Hotel charges are ₹4,000 × 20 = ₹80,000. The lower amount is ₹24,000, with no employee recovery.

Where it goes wrong. Taking the actual hotel bill as the taxable value without comparing it with 24% of salary for the relevant period.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 12 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Anuradha's hotel accommodation was provided for 20 days in connection with her transfer. Which statement correctly applies the transfer-related hotel exception?

1. The first 15 days are exempt, while only five days are valued.
2. The 15-day exception is unavailable, and all 20 days enter the hotel valuation. (correct answer)
3. The entire stay is exempt because it arises from a transfer.
4. Only the hotel charges for the final five days are taxable.

Answer: B — The 15-day exception is unavailable, and all 20 days enter the hotel valuation.

Explanation. Rule 15 provides that hotel accommodation on transfer does not result in a perquisite where it is provided for a period not exceeding an aggregate of 15 days. Anuradha's stay is 20 days, so the prescribed exception is unavailable. Consequently, the hotel accommodation is valued for the entire 20-day period under the lower-of formula. The value is ₹24,000, being the lower of ₹80,000 actual hotel charges and ₹24,000 representing 24% of salary for the period.

Where it goes wrong. Assuming that the first 15 days remain exempt even when the aggregate transfer-related hotel accommodation exceeds 15 days.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 13 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. Aryan Steels Ltd. provides unfurnished accommodation owned by the employer to an employee in a city whose population is precisely 40 lakh according to the 2011 census. Salary for the 12-month occupation period is ₹24,00,000, and the employee pays ₹5,000 per month. Determine the taxable accommodation value. Pay particular attention to whether a population of precisely 40 lakh enters the highest percentage slab.

Aryan Steels Ltd. provides unfurnished accommodation owned by the employer to an employee in a city whose population is precisely 40 lakh according to the 2011 census. Salary for the 12-month occupation period is ₹24,00,000, and the employee pays ₹5,000 per month. Determine the taxable accommodation value. Pay particular attention to whether a population of precisely 40 lakh enters the highest percentage slab.

1. ₹1,80,000
2. ₹2,40,000
3. Nil
4. ₹1,20,000 (correct answer)

Answer: D — ₹1,20,000

Explanation. The highest slab requires population exceeding 40 lakh. A city with precisely 40 lakh falls within the middle slab, exceeding 15 lakh but not exceeding 40 lakh. The rate is 7.5%. Accommodation value = ₹24,00,000 × 7.5% = ₹1,80,000. Employee rent paid = ₹5,000 × 12 = ₹60,000. Taxable value = ₹1,80,000 − ₹60,000 = ₹1,20,000.

Where it goes wrong. Treating the phrase exceeding 40 lakh as including a city whose population is precisely 40 lakh.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 14 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. An employer provides its employee with unfurnished accommodation owned by the employer in a city having a population of precisely 15 lakh according to the 2011 census. Salary for the occupation period is ₹8,00,000 and no rent is recovered. What is the taxable accommodation value? Assume that the employee occupies the residence for the entire relevant period.

An employer provides its employee with unfurnished accommodation owned by the employer in a city having a population of precisely 15 lakh according to the 2011 census. Salary for the occupation period is ₹8,00,000 and no rent is recovered. What is the taxable accommodation value? Assume that the employee occupies the residence for the entire relevant period.

1. ₹60,000
2. ₹40,000 (correct answer)
3. ₹80,000
4. Nil

Answer: B — ₹40,000

Explanation. The middle population slab applies only when population exceeds 15 lakh. A city having precisely 15 lakh population is covered by the other-area category. The prescribed rate is 5%. Value of accommodation = ₹8,00,000 × 5% = ₹40,000. Since the employee pays no rent, there is no reduction. The taxable accommodation perquisite is therefore ₹40,000.

Where it goes wrong. Applying 7.5% to a city with exactly 15 lakh population despite the middle slab requiring population above 15 lakh.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 15 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. An employee occupies an unfurnished company-owned apartment in a city with a 2011 census population of 45 lakh. The apartment is provided for ten months, during which salary for perquisite valuation is ₹15,00,000. The employee pays ₹9,000 per month towards the accommodation. Calculate the taxable perquisite. Assume that no furniture or additional benefit is provided.

An employee occupies an unfurnished company-owned apartment in a city with a 2011 census population of 45 lakh. The apartment is provided for ten months, during which salary for perquisite valuation is ₹15,00,000. The employee pays ₹9,000 per month towards the accommodation. Calculate the taxable perquisite. Assume that no furniture or additional benefit is provided.

1. ₹60,000 (correct answer)
2. ₹1,50,000
3. ₹90,000
4. ₹2,40,000

Answer: A — ₹60,000

Explanation. Population exceeds 40 lakh; hence, the applicable value is 10% of salary for the occupation period. Ten per cent of ₹15,00,000 is ₹1,50,000. Employee recovery is ₹9,000 × 10 = ₹90,000. Taxable perquisite is ₹1,50,000 − ₹90,000 = ₹60,000. The occupation period and salary amount are already given for ten months, so no further annualisation is required.

Where it goes wrong. Applying the population rate to an annual salary figure different from the stated occupation-period salary, or forgetting the employee's rent recovery.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 16 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. Vikramaditya Tech Labs LLP takes an apartment on lease for an employee for the entire tax year. Annual lease rent is ₹2,40,000, while the employee's salary for accommodation valuation is ₹18,00,000. The employee contributes ₹8,000 per month towards rent. Determine the taxable perquisite under the employer-leased accommodation method.

Vikramaditya Tech Labs LLP takes an apartment on lease for an employee for the entire tax year. Annual lease rent is ₹2,40,000, while the employee's salary for accommodation valuation is ₹18,00,000. The employee contributes ₹8,000 per month towards rent. Determine the taxable perquisite under the employer-leased accommodation method.

1. ₹1,44,000
2. ₹2,40,000
3. ₹84,000 (correct answer)
4. ₹1,80,000

Answer: C — ₹84,000

Explanation. For employer-leased accommodation, the initial value is the lower of actual lease rent or 10% of salary. Actual lease rent = ₹2,40,000. Ten per cent of salary = ₹18,00,000 × 10% = ₹1,80,000. The lower amount is ₹1,80,000. Employee rent recovery = ₹8,000 × 12 = ₹96,000. Taxable perquisite = ₹1,80,000 − ₹96,000 = ₹84,000.

Where it goes wrong. Using the actual lease rent automatically without comparing it with 10% of salary for the same occupation period.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 17 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. For accommodation valuation, an employee receives basic salary of ₹80,000 per month, DA of ₹30,000 per month of which 50% enters retirement benefits, and cash allowance of ₹10,000 per month. The employee receives a bonus of ₹75,000 during the eight-month occupation period. Employer provident fund contribution is ₹96,000, and a tax-exempt allowance of ₹24,000 is also received. Determine salary for accommodation valuation.

For accommodation valuation, an employee receives basic salary of ₹80,000 per month, DA of ₹30,000 per month of which 50% enters retirement benefits, and cash allowance of ₹10,000 per month. The employee receives a bonus of ₹75,000 during the eight-month occupation period. Employer provident fund contribution is ₹96,000, and a tax-exempt allowance of ₹24,000 is also received. Determine salary for accommodation valuation.

1. ₹8,40,000
2. ₹10,35,000
3. ₹9,99,000
4. ₹9,15,000 (correct answer)

Answer: D — ₹9,15,000

Explanation. Basic salary = ₹80,000 × 8 = ₹6,40,000. Eligible DA = ₹30,000 × 50% × 8 = ₹1,20,000. Cash allowance = ₹10,000 × 8 = ₹80,000. Bonus = ₹75,000. Aggregate salary = ₹6,40,000 + ₹1,20,000 + ₹80,000 + ₹75,000 = ₹9,15,000. Employer PF contribution and tax-exempt allowance are excluded from the valuation salary.

Where it goes wrong. Including exempt allowances and employer PF contributions or excluding non-monthly bonus from the prescribed salary definition.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 18 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. An employer-owned apartment is occupied by an employee throughout 2026-27. Furniture costing ₹6,00,000 is provided separately from 1 December 2026. The furniture remains available through 31 March 2027, and the employer does not recover any amount from the employee for its use. Calculate the furniture-related perquisite value for the four-month period.

An employer-owned apartment is occupied by an employee throughout 2026-27. Furniture costing ₹6,00,000 is provided separately from 1 December 2026. The furniture remains available through 31 March 2027, and the employer does not recover any amount from the employee for its use. Calculate the furniture-related perquisite value for the four-month period.

1. ₹20,000 (correct answer)
2. ₹60,000
3. ₹40,000
4. ₹15,000

Answer: A — ₹20,000

Explanation. Furniture owned by the employer attracts an addition of 10% per annum of its cost to the accommodation value. Cost of furniture = ₹6,00,000. Annual value = ₹6,00,000 × 10% = ₹60,000. Furniture is provided for four months, so the relevant value is ₹60,000 × 4/12 = ₹20,000. No employee recovery is available for deduction. The furniture value is added to the underlying accommodation valuation.

Where it goes wrong. Charging 10% of the entire furniture cost for a full tax year when the furniture is provided for only four months.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 19 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. An employer hires household furniture from an external agency for an employee's accommodation. The hire charge is ₹7,500 per month for eight months. The employee pays ₹1,500 per month towards the furniture. What amount should be added to the accommodation value as the furniture-related perquisite?

An employer hires household furniture from an external agency for an employee's accommodation. The hire charge is ₹7,500 per month for eight months. The employee pays ₹1,500 per month towards the furniture. What amount should be added to the accommodation value as the furniture-related perquisite?

1. ₹60,000
2. ₹12,000
3. ₹48,000 (correct answer)
4. ₹36,000

Answer: C — ₹48,000

Explanation. For furniture hired from an external agency, the perquisite is the actual hire charges payable by the employer, reduced by charges paid by the employee. Employer's hire charges = ₹7,500 × 8 = ₹60,000. Employee's contribution = ₹1,500 × 8 = ₹12,000. Furniture-related perquisite = ₹60,000 − ₹12,000 = ₹48,000. The cost-based 10% annual valuation applies to furniture owned by the employer, not hired furniture.

Where it goes wrong. Using the owned-furniture valuation method rather than the actual hire-charge method.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 20 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. Smt. Priya, a Government employee, occupies furnished Government accommodation for eight months. Government-determined licence fee is ₹22,000 per month, and she pays ₹7,000 per month. Employer-owned furniture costing ₹3,60,000 is provided throughout these eight months. Calculate the aggregate accommodation and furniture perquisite. There are no other recoveries.

Smt. Priya, a Government employee, occupies furnished Government accommodation for eight months. Government-determined licence fee is ₹22,000 per month, and she pays ₹7,000 per month. Employer-owned furniture costing ₹3,60,000 is provided throughout these eight months. Calculate the aggregate accommodation and furniture perquisite. There are no other recoveries.

1. ₹1,20,000
2. ₹1,44,000 (correct answer)
3. ₹1,76,000
4. ₹1,68,000

Answer: B — ₹1,44,000

Explanation. Government accommodation value = (₹22,000 − ₹7,000) × 8 = ₹1,20,000. Furniture value = ₹3,60,000 × 10% × 8/12 = ₹24,000. Aggregate perquisite = ₹1,20,000 + ₹24,000 = ₹1,44,000. Government employees are valued using the Government-determined licence fee, reduced by employee rent payments. The furniture addition is computed separately as 10% per annum of furniture cost for the actual provision period.

Where it goes wrong. Applying the population-based percentages to Government accommodation or treating the eight-month furniture addition as a full-year amount.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 21 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. A company provides an employee with hotel accommodation for four months without the stay being connected with a transfer. Salary for accommodation valuation during the four months is ₹8,00,000. The hotel's charges total ₹2,10,000, and the employee pays ₹10,000 per month towards the stay. Determine the taxable hotel accommodation perquisite.

A company provides an employee with hotel accommodation for four months without the stay being connected with a transfer. Salary for accommodation valuation during the four months is ₹8,00,000. The hotel's charges total ₹2,10,000, and the employee pays ₹10,000 per month towards the stay. Determine the taxable hotel accommodation perquisite.

1. ₹2,10,000
2. ₹1,92,000
3. ₹1,12,000
4. ₹1,52,000 (correct answer)

Answer: D — ₹1,52,000

Explanation. For hotel accommodation, the initial valuation is the lower of 24% of salary or actual hotel charges. Twenty-four per cent of ₹8,00,000 = ₹1,92,000. Actual hotel charges are ₹2,10,000. The lower value is ₹1,92,000. Employee contribution = ₹10,000 × 4 = ₹40,000. Taxable perquisite = ₹1,92,000 − ₹40,000 = ₹1,52,000. The 15-day transfer exception cannot apply because this is not a transfer-related stay.

Where it goes wrong. Applying the 15-day transfer exception to an ordinary hotel stay that is not connected with a transfer.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 22 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. An employee is transferred from Bengaluru to Mumbai. On account of the transfer, the employer provides hotel accommodation for eight days in one hotel and seven days in another hotel. Both stays occur consecutively during the same transfer and the employee pays no rent. What is the correct tax treatment of the accommodation?

An employee is transferred from Bengaluru to Mumbai. On account of the transfer, the employer provides hotel accommodation for eight days in one hotel and seven days in another hotel. Both stays occur consecutively during the same transfer and the employee pays no rent. What is the correct tax treatment of the accommodation?

1. Only the second hotel's charges are taxable.
2. The first eight days are exempt.
3. No hotel accommodation perquisite is chargeable. (correct answer)
4. The lower-of formula applies to all 15 days.

Answer: C — No hotel accommodation perquisite is chargeable.

Explanation. Rule 15 provides a hotel accommodation exception for transfer-related stays that do not exceed an aggregate of 15 days. The employee's stay is eight days plus seven days, totalling 15 days. The fact that two different hotels are used does not restart the aggregate period. Since the aggregate stay does not exceed 15 days, no hotel accommodation perquisite is chargeable for this transfer-related stay.

Where it goes wrong. Counting the 15-day limit separately for each hotel instead of aggregating hotel accommodation provided in connection with the same transfer.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 23 · 2 marks · Taxation - DT Ch 03: Salaries · medium

Scenario. An employee is transferred to another city and provided hotel accommodation for 16 days. The actual hotel charges are ₹6,000 per day. Monthly salary for accommodation valuation is ₹1,50,000. No amount is recovered from the employee. Assuming a 30-day month for the computation, determine the hotel accommodation perquisite. Consider whether the transfer-related exception applies.

An employee is transferred to another city and provided hotel accommodation for 16 days. The actual hotel charges are ₹6,000 per day. Monthly salary for accommodation valuation is ₹1,50,000. No amount is recovered from the employee. Assuming a 30-day month for the computation, determine the hotel accommodation perquisite. Consider whether the transfer-related exception applies.

1. ₹96,000
2. ₹19,200 (correct answer)
3. Nil
4. ₹24,000

Answer: B — ₹19,200

Explanation. The aggregate hotel stay is 16 days, exceeding the 15-day transfer exception. Salary for 16 days = ₹1,50,000 × 16/30 = ₹80,000. Twenty-four per cent of salary for this period = ₹80,000 × 24% = ₹19,200. Actual hotel charges = ₹6,000 × 16 = ₹96,000. The lower of the two values is ₹19,200. No employee payment is available for reduction.

Where it goes wrong. Treating the first 15 days as exempt and valuing only the sixteenth day, instead of testing the aggregate-period condition.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 24 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. Mr. Vikram is transferred to another city on 1 December 2026. He retains the accommodation at his former posting, having a monthly perquisite value of ₹10,000, while the new accommodation has a monthly perquisite value of ₹16,000. Both accommodations are provided for 120 days after transfer. Assuming a 30-day month for computation, what is the total accommodation perquisite during the overlapping period?

Mr. Vikram is transferred to another city on 1 December 2026. He retains the accommodation at his former posting, having a monthly perquisite value of ₹10,000, while the new accommodation has a monthly perquisite value of ₹16,000. Both accommodations are provided for 120 days after transfer. Assuming a 30-day month for computation, what is the total accommodation perquisite during the overlapping period?

1. ₹56,000 (correct answer)
2. ₹1,56,000
3. ₹1,20,000
4. ₹31,000

Answer: A — ₹56,000

Explanation. Where accommodation is provided at the new posting while the former accommodation is retained, only the lower perquisite value is considered for the first 90 days. The lower monthly value is ₹10,000. For 90 days, the value is ₹10,000 × 3 = ₹30,000. For the remaining 30 days, both accommodations are chargeable: ₹10,000 + ₹16,000 = ₹26,000. Total perquisite = ₹30,000 + ₹26,000 = ₹56,000.

Where it goes wrong. Continuing to value only the lower accommodation after 90 days, instead of including both accommodation values thereafter.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026

Question 25 · 2 marks · Taxation - DT Ch 03: Salaries · hard

Scenario. A Central Government employee is deputed to a corporation controlled by the Central Government. The Government provides residential accommodation to the employee in a city with a population exceeding 40 lakh under the 2011 census. Salary for accommodation valuation is ₹12,00,000, and the employee pays ₹2,000 per month towards occupation. What is the taxable accommodation perquisite for the full year under the special deputation rule?

A Central Government employee is deputed to a corporation controlled by the Central Government. The Government provides residential accommodation to the employee in a city with a population exceeding 40 lakh under the 2011 census. Salary for accommodation valuation is ₹12,00,000, and the employee pays ₹2,000 per month towards occupation. What is the taxable accommodation perquisite for the full year under the special deputation rule?

1. ₹1,44,000, using Government licence fee.
2. ₹60,000, using the 5% population slab.
3. ₹1,20,000, without employee rent deduction.
4. ₹96,000, using 10% of salary less rent paid. (correct answer)

Answer: D — ₹96,000, using 10% of salary less rent paid.

Explanation. Where Government accommodation is provided to an employee serving on deputation with a body or undertaking controlled by that Government, the body or undertaking is deemed to be the employer for valuation purposes. The accommodation is valued as though it were employer-owned. Population exceeds 40 lakh, so the rate is 10%. Value = ₹12,00,000 × 10% = ₹1,20,000. Rent paid = ₹2,000 × 12 = ₹24,000. Perquisite = ₹96,000.

Where it goes wrong. Continuing to apply the Government licence-fee method during deputation instead of applying the deemed-employer treatment prescribed by the rule.

Authority. Section 17(1) of the Income-tax Act, 2025; Rule 15 of the Income-tax Rules, 2026