C.S. Intermediate paper of Tax Laws
Question : Rajeev works in an MNC, he has 2 options - take a RFA (Rent Free Accommodation) provided by company, or take HRA (House Rent Allowance) of Rs. 5000 per month. Evaluate.
Answer : Rajeev seems to be a middle class man, who must have worked hard all his childhood. Now he should not get into nitty gitty of tax, specially when he will save 500-600 if he takes the better option. Its utter nonsense to save 500-600 of tax, and choose an option that will make him pay more mentally/physically/financially eventually. We must look into this matter with pure logical ground which is -
If he takes 5000 rs as HRA,
1. He can live where ever he wants.
2. He will have to pay high rent, as RFA are always cheaper, if they weren't, nobody would opt and the system will fail.
About the scenario when he takes the RFA, he can -
1. Share his car with fellow employees to office, and save on petrol.
2. Be happy as all his company people will live together like family. With his kids having company of like minded friends.
3. Get a healthy working environment, as people who live and work together share a special bond.
4. Save the time spent on needless tax calculation of RFA and HRA.
I say, take the RFA.