rediff.com: Budget Special:Taxman cometh to pinch your perks
rediff.com Home > Money > Budget 2001 > Report Banner Ads
Channels: Astrology | Broadband | Contests | E-cards | Money | Movies | Romance | Search | Weather | Wedding | Women
Partner Channels: Auctions | Auto | Bill Pay | Jobs | Lifestyle | Technology | Travel
March 2, 2001                                       Feedback  

    - BUDGET SPEECH '00
    - COLUMNISTS
    - INTERVIEWS
    - CREDIT POLICY
    - ECONOMIC SURVEY
    - GOVT & ECONOMY
    - BUDGET RUN-UP
    - RAILWAY BUDGET
    - EXIM POLICY '00


    
      


    - BUDGET PROCESS

    - BUDGET 00-01
    - BUDGET 99-00
    - BUDGET 98-99
    - BUDGET 97-98

    - NEWSLINKS


Information you can use

   The Best Budget Sites
   Ministry of Finance
   Budget 2000
   Reserve Bank of India


 




Banner Ads
Banner Ads
Banner Ads
Banner Ads
 Search the Internet
         Tips
 Sites: Finance, Investment
E-Mail this report to a friend
Print this page


Taxman cometh to pinch your perks

BS Corporate Bureau

Perquisites are now taxable. If you are employed with an MNC or a large private firm and a considerable part of your salary comes as perks, be prepared for the coming pull on your purse strings. Your employer is bound, by a provision laid down in Budget 2001-02, to file his tax returns showing the employers' salaries based on cost to the company.

Perks for house rent, car and telephone usage are, however, exempt from such taxation. This will be effective from April 1, 2002 and shall apply to assessment year 2002-2003 and subsequent years.

Analysts say that though the Budget does not mention perks drawn by employees being taxed, the Income Tax rules will provide for mandatory taxation at the employers' end.

According to them, most multinational companies would prefer it that way, while a few Indian companies not practising proper disclosure norms, are likely to feel the pinch.

The employee will stand to lose money since the employer is declaring his salary based on cost to the company and he will have to pay taxes on the perquisites that were not previously taxed. Only those employees stand to benefit who are in a position to bargain for a compensation for the tax deducted thereby.

The Budget has also removed deductions granted on entertainment allowances. It has also proposed to revise the limit of taxing perquisites in the case of employees where the monetary payment of salary is in excess of Rs 50,000.

To avoid ambiguity, the Budget has also proposed that details of perquisites will be fixed in the manner prescribed in the Income Tax rules.

Rakesh Mohan, advisor to the finance ministry, explained that cars, house rent and telephone bills will be exempt from such taxation. All other perks will be brought under the tax net.

Mohan said the obligation was on the person responsible for paying income under head salaries to file details of perquisites and profits in lieu of their salaries. Failure to comply with the rules is liable to penal action. However, he added that there will be no scrutiny by the government.

Analysts, on the contrary said that though this was a good move, it is unlikely that the government will not engage in scrutiny.

"If the employer files all details of the employees salary including tax, how can the employee evade paying taxes to the same tune," taxation expert SP Narang asks.

According to him, the government is only trying to implement high standards of compliance, while also tapping other sources of revenue generation when the taxation rates are decreasing.

"The impact of these much required moves will pay dividends in the next two-three years," he added.

Powered by

ALSO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money

Tell us what you think of this report