I am not a party pooper which several of my angry geek-friends described me as when I wrote in these columns wondering why the employee stock option scheme, particularly popular in the IT sector, begets the taxman's indulgence. This time round it may be the turn of widows and other dependants to target me for spoiling their small party.
The Finance Act, 2005 abolished standard deduction for employees on the ground that with the increase in the tax-free threshold as well as with the rationalisation of the existing slabs, there was no case for this prop. The mandarins of the North Block were rather magnanimous in not simultaneously deleting Section 57(iia), which allows standard deduction to those receiving family pension. Or was it a case of benign negligence?
It is not as if the author is begrudging the small mercy to the dependants of the deceased employee. There was absolutely no justification for doing away with standard deduction on the specious plea that the tax rates have come down. The tax burden has indeed come down but the beneficiaries are not the salaried class alone. Has any of the numerous expenses which a businessman or professional incurs been done away with? No. In the event, wrenching away of standard deduction, which is in the nature of relief for expenses an employee incurs in the course of performance of his duties, is a cruel blow to him.
True, those calling the shots in the company, such as managing directors and executive directors, do not deserve this deduction because the company effectively takes care of their entire creature and other comforts as well as bears every conceivable expense they incur. But the garden-variety employee gets none of these indulgences from his employer. The Government, therefore, should have retained the standard deduction dispensation at least in respect of low- and middle-level employees by specifying a salary threshold for this purpose instead of tarring all the employees with the same brush.
The low- and middle-level employees deserve the same sympathy, which dependants of the deceased employees have rightly got whether intentionally or otherwise.
The Finance Minister should carry on with the good work of training his guns on the hard-to-tax categories and smoking them out instead of getting squeamish with the salaried class whose tax-compliance rate can be easily rated the highest even without a survey.
The salaried deserve standard deduction on one more ground as an incentive for baring their chests to their employers while they deduct tax at source even as their business and professional counterparts merrily arrange their tax affairs in such a way that they can get away with minor bruises if at all.
S. Murlidharan (The author is a Delhi-based chartered accountant.)