Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: cpt :: empanelment :: TDS :: VAT Audit :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ACCOUNTING STANDARD :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: VAT RATES :: form 3cd :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT
 
 
« News Headlines »
 Use ITR-2 to show salary and capital gains income
  TDS Applicability On Government Contracts Under Gst (Under Section 51 Of The Cgst Act, 2017)
  How to file ITR for FY 2016-17 and all the links you need
 All about E-way Bill under GST
 Good and simple tax: on the GST regime
 Seeks to extend the time limit for filing of GSTR-1, GSTR-2 and GSTR-3
 Good news, find Tax Return Preparers soon at a place near you; 5 things to know
 Filing of GST return
 Why cement companies are going in for M&As
 Govt moves to rework direct tax law after PM’s nudge
 New offer available for filing tax returns online, how to avail

Bonanza for salaried
December, 25th 2007
Over the years, due to the reduction in the effective tax rates, the tax exemptions and deductions available to individuals/salaried employees have reduced. One such relief is provided for under Section 10 (10CC) of the Income-Tax Act, 1961, whereby, the tax paid by the employer, on non-monetary perquisites is not considered to be taxable income in the hands of employees. Two issues need to be addressed in this context

Tax paid by the employer perquisite or salary

Whether tax paid by the employer is a perquisite or salary is not expressly stated under the Act. One view is that the tax being an obligation of the employee and met by the employer is to be treated as a perquisite. The other view is that the tax paid by the employer is no different from the salary paid to the employee and that it is merely an allocation of salary towards taxes.

If tax paid is a perquisite whether monetary or non-monetary?

If the tax paid by the employer is considered to be a perquisite, the next issue to be addressed is whether it is a monetary payment or a non-monetary perquisite.

The phrase monetary payment and non-monetary perquisites has not been defined under the Act and different views are expressed as to their classification. This distinction is important as it has a direct impact on the taxability of the employee, in terms of single or multiple grossing up and hence, the overall cost for the employer.

Recent decision of the Special Bench of Delhi Tribunal

In a recent decision, the Special Bench of Delhi Income-Tax Appellate Tribunal has held that the tax paid by the employer on behalf of the employee would constitute a perquisite. Further, such tax payment to the government would not constitute monetary payment to the employee and therefore not subject to multiple grossing up.

Overall saving in the cost for the employer

As an illustration, if the employer agrees to pay Rs 100 net of tax salary to the employee in India and the tax rate is 34%. Then, if such a tax payment by the employer is considered to be a non-monetary perquisite then only Rs 34 shall be added to the taxable income of the employee. Whereas, if such tax payment by the employer is considered a monetary payment then Rs 34 will be subject to multiple grossing up and Rs 52 will be added in the taxable income of the employee, so that after paying a tax of 34% on Rs 152, the employee receives Rs 100 (approximately) net of tax salary.

More beneficial in case of employers not having taxable income

A down side of such relief is that the employer is not eligible to claim corporate tax deduction for such tax paid by it. This exemption, however, is important in case of employers enjoying tax holiday or those having no taxable income or losses in India, as theirs being no taxable income, no corporate tax deduction is claimed and hence, this relief is worth considering. The above ruling may be challenged by tax authorities at higher levels, however, till then this is a welcome ruling to claim relief and optimise overall employment costs by the employer.

Vikas Vasal
(The author is the executive director with KPMG)
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
System Testing Solution Manual Software Testing Solutions Automation Software Testing Solutions System Workflow Testing System Manual Testing

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions