Meaning of term Perquisite

 Meaning of term Perquisite  Amount paid by an employer iro any obligation which otherwise would have been payable by employee, Educational facility to employees family members, electricity or water for house hold purposes, Furnished / unfurnished house without rent or at concessional rent, gardener, Leave travel concession, Meaning of term Perquisite, or personal attendant, Service of sweeper, Supply of gas, watchman
May 062015
 

Meaning of term Perquisite

Dictionary meaning

  1. A gain or profit incidentally made from employments in addition to regular salary or wages,especially one of a kind expected or promised
  2. Casual emolument or benefit attached to an office or position in addition to salary or wages
  3. Anything left over that a servant or other has by custom a right to keep
  4. A tip expected upon some occasion
  5. Something regarded as a falling to one by right

PERQUISITES signify some benefit in addition to the amount that may be legally due by way of contract for services rendered.

Meaning under income tax act

Section 17(2) gives an inclusive definition of perquisite,as including:

  1. The value of rent –free accommodation provided to the assessee by his employer [sec.17(2)(i)] ;
  2. The value of any concession in the matter of rent respecting any accommodation provided to the assessee by his employer [ Sec.17(2)(ii)];
  3. The value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases :
    – By a company to an employee who is a director thereof;
    – By a company to an employee,being a person who has substantial interest in the company;
    – By an employer (including a company) to an employee to whom provisions of (i) and (ii)above do not apply and whose income under the head “Salaries” exclusive of the value of all benefits or amenities not provided for by way of monetary benefits, exceed Rs.50,000[sec.17 (2)(iii);
  4. Any sum paid by the employer in respect of any obligation which but for such payment have been payable by the assessee [sec.17(2)(v)];
  5. Any sum payable by the employer, whether directly or through a fund other than a recognised provident fund or approved superannuation fund or a deposits-linked insurance fund, to effect an assurance on the life of the assessee or to effect a contract for an annuity [sec.17(2)(v);
  6. The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer or former employer, free of cost or at concessional rate to the assessee [sec.17(2)(vi)];
  7. The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee to the extent it exceed one lakh rupees[sec.17(2)(viii)]; and
  8. The value of any other fringe benefit or amenity as may be prescribed [sec.17 (2)(viii)].

Following table shows what all perquisites are chargeable / not chargeable to tax:

List of taxable perquisite When these perquisite are not taxable
Furnished / unfurnished house without rent or at concessional rent 1. If provided in remote area2. Hotel accommodations for 15 days on account of transfer3. Option in case of accommodation provided in new place of work4. High court judge

5. Supreme court judge

6. Union minister

7. Leader of opposition in parliament
Service of sweeper, gardener, watchman, or personal attendant Not taxable in case of non-specified employee
Supply of gas, electricity or water for house hold purposes Not taxable in case of non-specified employee
Educational facility to employees family members Not taxable in case of non-specified employee
Leave travel concession 1. Not taxable twice in a block of 4 years2. Not taxable in case of non-specified employee
Amount paid by an employer or any obligation which otherwise would have been payable by employee Income tax borne by employer
Amount payable by an employer, directly or indirectly, to effect an assurance on the life of employee or to effect a contract of an annuity Contribution to recognized provident fund
Interest free / concessional loan 1. Aggregate amount of original loan does not exceeds Rs. 20,0002. Purpose of loan taken is Medical treatment
Proving use of movable assets Use of computer / laptop
Transfer of movable assets
Medical facility In some cases medical facility is not taxable
Car or any other automotive conveyance 1. Not taxable in case of non-specified employee2. Conveyance facility between office and residence
Transport facility by a transport undertaking 1. Provided by airline or railways2. Not taxable in case of non-specified employee
Free food and beverage 1. Provided in working hours in remote area or offshore installations2. Snacks in working hours3. Meals in office hours if Cost To Employer is not more than Rs 50 per meal
Traveling, touring accommodation
Gift or gift voucher Gift upto Rs. 50000
Credit card
Club
Tax of an employee paid by his employer Tax on non-monetary perquisites
Value of an specified security / sweat equity shares allotted or transferred to an employee or former employee
Employers contribution towards superannuation fund in excess of specified amount Not chargeable to tax if employer’s contribution is Rs. 100,000 or less per year
Perquisite received by a teacher / professor from SAARC Member States
Any other benefit or amenity, service, right or privileges Telephone / mobile phones are not chargeable to tax

The above table gives a gist of taxability of different types of perquisites. In our upcoming blogs you will find detail tax treatment for each of the element discussed above.

Tax Benefits Provided in Finance Act 2015

 Tax Benefits Provided in Finance Act 2015  Uncategorized
May 052015
 

Tax Benefits Provided in Finance Act 2015

The Finance Act 2015 comes with many additional benefits for an individual assessee. Here an attempt is made to discuss all provision providing additional benefits to assessee by finance act.

Particulars of Tax Benefits Exiting Provision Deduction / Benefit allowed Effective Date of Amendment
Tax benefits under section 80C for the girl child under the Sukanya Samriddhi Account Scheme No such concept Exemption given under EEE model:
(i) The investments made in the Scheme will be eligible for deduction under section 80C of the Act.
(ii) The interest accruing on deposits in such account will be exempt from income tax.
(iii) The withdrawal from the said scheme in accordance with the rules of the said scheme will be exempt from tax.		 1st April, 2015, i.e., AY 2015-16 and subsequent assessment years.
Amendment in section 80D relating to deduction in respect of health insurance premia Maximum deduction allowed under this section can be summarized as under:

For Individual or HUF Rs. 15000/-+Rs. 15000/- for insuring health of his parents
Senior citizen Rs. 20,000/-
Maximum deduction allowed under this section can be summarized as under:

For Individual or HUF Rs. 25000/-+Rs. 25000/- for insuring health of his parents
Senior citizen Rs. 30,000/-
Very Senior citizen incurring medical expenditure Rs. 30,000/-
1st April, 2016, i.e., AY 2016-17 and subsequent assessment years.
Raising the limit of deduction under section 80DDB For treatment of special deceases deduction upto Rs 40,000/- is allowed and in respect to senior citizen Rs 60,000/-

Conditions:1. Certificate from specialist doctor working under government hospital.		 For treatment of special deceases deduction upto Rs 40,000/- is allowed.For senior citizen assessee deduction upto Rs 60,000/- is allowed.For vary senior citizen assessee deduction upto Rs 80,000/- is allowed.Conditions:1. Assessee will be required to obtain a prescription from a specialist doctor. 1st April, 2016, i.e., AY 2016-17 and subsequent assessment years.
Raising the limit of deduction under section 80DD and 80U for persons with disability and severe disability
1. Expenditure for the medical treatment training and rehabilitation of a dependant, being a person with disability
2. Insurance for maintenance of person with disability		 Normal disability – Rs 50,000
Serve disability – Rs 1 lacs

Condition:

1. Person shall be certified by the medical authority to be a person with disability.
1. Expenditure for the medical treatment training and rehabilitation of a dependant, being a person with disability
2. Insurance for maintenance of person with disability		 Normal disability – Rs75,000
Serve disability – Rs 1.25lacs
1st April, 2016, i.e., AY 2016-17 and subsequent assessment years.
Raising the limit of deduction under 80CCC Under the existing provisions contained in sub-section (1) of the section 80CCC, an assessee, being an individual is allowed a deduction upto one lakh rupees in the computation of his total income, of an amount paid or deposited by him to effect or keepin force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from a fund set up under a pension scheme. In order to promote social security, it is proposed to amend sub-section (1) of the said section so as to raise the limit of deduction under section 80CCC from one lakh rupees to one hundred and fifty thousand rupees, within the overall limit provided in section 80CCE. 1st April, 2016, i.e., AY 2016-17 and subsequent assessment years.
Additional deduction under 80CCD Under the existing provisions contained in sub-section (1) of section 80CCD of the Income-tax Act, 1961 if an individual,employed by the Central Government on or after 1st January, 2004, or being an individual employed by any other employer, or any other assessee being an individual has paid or deposited any amount in a previous year in his account under a notified pension scheme, a deduction of such amount not exceeding ten per cent. of his salary in the case of an employee and ten percent of the gross total income in case of any other individual is allowed. Similarly, the contribution made by the Central Government or any other employer to the said account of the individual under the pension scheme is also allowed as deduction under sub-section (2) of section 80CCD, to the extent it does not exceed ten per cent. of the salary of the individual in the previous year.Sub-section (1A) of section 80CCD provides that the amount of deduction under sub-section (1) shall not exceed one hundred thousand rupees. Till date, under section 80CCD, only the National Pension System (NPS) has been notified by the Ministry of Finance. With a view to encourage people to contribute towards NPS, it is proposed to omit sub-section (1A). In addition to the enhancement of the limit under section 80CCD(1), it is further proposed to insert a new sub-section (1B) so as to provide for an additional deduction in respect of any amount paid, of upto fifty thousand rupees for contributions made by any individual assessees under the NPS.Consequential amendments are also proposed in sub-section (3) and sub-section (4) of section 80CCD. 1st April, 2016, i.e., AY 2016-17 and subsequent assessment years.
Enabling of filing of Form 15G/15H for payment made under life insurance policy No such provision The Finance (No.2) Act, 2014, inserted section 194DA in the Act with effect from 1.10.2014 to provide for deduction of tax at source at the rate of 2% from payments made under life insurance policy, which are chargeable to tax. It has been further provided that no deduction shall be made if the aggregate amount of payment during a financial year is less than Rs. 1,00,000. In spite of providing high threshold for deduction of tax under this section, there may be cases where the tax payable on recipient’s total income, including the payment made under life insurance, will be nil. The existing provisions of section 197A of the Act inter alia provide that tax shall not be deducted, if the recipient of the certain payment on which tax is deductible furnishes to the payer a self-declaration in prescribed Form No.15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. It is, therefore, proposed to amend the provisions of section 197A for making the recipients of payments referred to in section 194DA also eligible for filing self-declaration in Form No.15G/15H for non-deduction of tax at source in accordance with the provisions of section 197A. This amendment will take effect from 1st June, 2015.
Relaxing the requirement of obtaining TAN for certain deductors Under the provisions of section 203A of the Act, every person deducting tax (deductor) or collecting tax (collector) is required to obtain Tax Deduction and Collection Account Number (TAN) and quote the same for reporting of tax deduction/collection to the Income-tax Department. To reduce the compliance burden of these types of deductors, it is proposed to amend the provisions of section 203A of the Act so as to provide that the requirement of obtaining and quoting of TAN under section 203A of the Act shall not apply to the notified deductors or collectors. This amendment will take effect from 1st June, 2015.

 

e-Payment of ESIC Effective from 1st May 2015

 e-Payment of ESIC Effective from 1st May 2015  e-Payment of ESIC Effective from 1st May 2015, ESIC
May 052015
 

All ESIC Payment is to be made online from 1st May 2015, Please find the details process of the same & list of 58 Banks from where ESIC Payments can be made Online.

Detail Process of E- Payment

Online ESIC Payment Process

List of bank for Online ESIC Payment

courtesy: [Prakash Consultancy Services ]

TDS on withdrawal of fund from Employees Provident Fund

 TDS on withdrawal of fund from Employees Provident Fund  TDS on pre-mature withdrawal of fund from Employees Provident Fund
May 042015
 

TDS on withdrawal of fund from Employees Provident Fund

Meaning of Recognized Provident Fund

Under the Employees Provident Fund and Miscellaneous Provisions Act, 1952 (EPF & MP Act, 1952), certain specified employers are required to comply with the Employees Provident Fund Scheme, 1952 (EPFS). However, these employers are also permitted to establish and manage their own private provident fund (PF) scheme subject to fulfillment of certain conditions.

The provident funds established under a scheme framed under EPF & MP Act, 1952 or Provident Fund exempted under section 17 of the said Act and recognised under the Income-tax Act are termed as Recognised Provident fund (RPF) under the Act.

System of taxation of RPF

Under existing rule of income tax act, the withdrawal of accumulated balance by an employee from the RPF is exempt from taxation.

However, if the employee makes withdrawal before continuous service of five years (other than the cases of termination due to ill health, closure of business, etc.) and does not opt for transfer of accumulated balance to new employer same is taxable.

Computation of income for TDS

For ensuring collection of tax in respect of these withdrawals, rule 10 of Schedule IV-A provides that the trustees of the RPF, at the time of payment, shall deduct tax as computed in rule 9 of Schedule IV-A.

Rule 9 of Schedule IV-A of the Act provides that the tax on withdrawn amount is required to be calculated by re-computing the tax liability of the years for which the contribution to RPF has been made by treating the same as contribution to unrecognized provident fund.

Existing difficulty

However, at times, it is not possible for the trustees of EPFS to get the information regarding taxability of the employee such as year-wise amount of taxable income and tax payable for the purposes of computation of the amount of tax liability under rule 9 of the Schedule-IV-A of the Act.

Amendment made in Finance Act 2015

It is, therefore, proposed to insert a new provision in Act for deduction of tax at the rate of 10% on pre-mature taxable withdrawal from EPFS.

Highlights of amendment:

  • For benefiting employees having taxable income below the taxable limit, a threshold limit of Rs.30,000/- for applicability of this proposed provision is provided in the act.
  • For reducing the compliance burden of employees further, the facility of filing self-declaration for non-deduction of tax under section 197A of the Act shall be extended to the employees receiving pre-mature withdrawal.
  • An employee can give a declaration in Form No. 15G to the effect that his total income including taxable pre-mature withdrawal from EPFS does not exceed the maximum amount not chargeable to tax and on furnishing of such declaration, no tax will be deducted by the trustee of EPFS while making the payment to such employee
  • Similar facility of filing self-declaration in Form No. 15H for non-deduction of tax under section 197A of the Act shall also be extended to the senior citizen employees receiving pre-mature withdrawal.
  • However, some employees making pre-mature withdrawal may be paying tax at higher slab rates (20% or 30%). Therefore, the shortfall in the actual tax liability vis-à-vis TDS is required to be paid by these employees either by requesting their new employer or through payment of advance tax / self-assessment tax.
  • For ensuring the payment of balance tax by these employees, furnishing of valid Permanent Account Number (PAN) by them to the EPFS is a prerequisite.
  • In order to ensure the collection of balance tax by employees falling under 20% or 30% slab rate, it is also proposed that non-furnishing of PAN to the EPFS for receiving these payments would attract deduction of tax at the maximum marginal rate.
  • These amendments will take effect from 1st June, 2015.

Extracts of amendments

41. After section 192 of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2015, namely:—

“192A. Notwithstanding anything contained in this Act, the trustees of the Employees’ Provident Fund Scheme, 1952, framed under section 5 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 or any person authorised under the scheme to make payment of accumulated balance due to employees, shall, in a case where the accumulated balance due to an employee participating in a recognised provident fund is includible in his total income owing to the provisions of rule 8 of Part A of the Fourth Schedule not being applicable, at the time of payment of the accumulated balance due to the employee, deduct income-tax thereon at the rate of ten per cent.:

Provided that no deduction under this section shall be made where the amount of such payment or, as the case may be, the aggregate amount of such payment to the payee is less than thirty thousand rupees:

Provided further that any person entitled to receive any amount on which tax is deductible under this section shall furnish his Permanent Account Number to the person responsible for deducting such tax, failing which tax shall be deducted at the maximum marginal rate.

Due dates for the Month of May 2015

 Due dates for the Month of May 2015  May 2015
May 042015
 

Due dates for the Month of May 2015
05-05-2015
 Service Tax
– Service Tax payments by Companies for April
06-05-2015
 Central Excise
– Payment of Excise Duty for all Assessees (other than SSI Units)
07-05-2015
 Income Tax
– TDS Payment for April
10-05-2015
 Central Excise
– Filing ER-1 Return (Other than SSI Units)
– Filing Quarterly ER-2 Return by 100% EOUs
– Filing Monthly ER-6 Return by specified class of Assessees regarding principal inputs.
15-05-2015
 Income Tax
– TDS / TCS Quarterly Statements (Other than government deductors) January to March
Providend Fund
– PF Payment for April
20-05-2015
 MVAT
– TDS Payment for April
21-05-2015
 ESIC
– ESIC Payment for April
MVAT *
– MVAT Monthly Return for April (TAX>1000000/-)
MVAT
– Monthly Payment of April
30-05-2015
 Income Tax
– Issue of TDS Certificate Form 16A by non Government deductor for Q4
31-05-2015
 Profession Tax
– Payment of April
Income Tax
– Issue Form 16 by Employer
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PPF – Loans and Withdrawals

 PPF – Loans and Withdrawals  PPF – Loans and Withdrawals, Providend Fund
May 012015
 

PPF – Loans and Withdrawals

Different between Loan and Withdrawal

Loan From PPF
Withdrawal of PPF amount
  • Needs repayment
  • Burden of interest payable
  • Impacts future loan eligibility
  • Impacts credit ratings
  • Repayment is not required
  • Impacts interest income in future

When to withdraw money / take loan

You should avail such loans / withdrawal facilities only when you are falling short of your finance and do not have any other option to achieve an important life goal such as child’s higher education or daughter’s marriage etc.

Such loans should not be availed to improve your life style or to buy a costly gadget. After all, this is the money that you have kept aside for your retirement.

Extracts of rules facilitating loan from PPF account

The PPF rulebook states it as follows:

“Notwithstanding the provisions of paragraph 9, any time after the expiry of one year from the end of the year in which the initial subscription was made but before expiry of five years from the end of the year in which the initial subscription was made, a subscriber may, he so desires, apply in Form D or as near thereto as possible, together with his pass book to the Accounts Office for obtaining loan…”

Who can avail loan facility

You can take a loan from the fund in case of need. You don’t have to wait till you become eligible for withdrawals from the account.

In simple terms, the following are the steps to see how much loan you can avail.

  • Say you opened your PPF account in August 2014.
  • The end of the financial year when the initial subscription was made is March 31, 2015.
  • The expiry of one year from the end of that financial year is March 31, 2016.
  • So from March 31, 2016, until 5 years from March 31, 2015, that brings us to March 31, 2020, you are entitled to apply for a loan against your PPF balance.

Therefore to simply put, from the second year of opening the PPF account to the sixth year, as a PPF account holder you can take a loan

How much loan you can take is defined as follows:

Rules

“… A subscriber may, he so desires, apply in Form D or as near thereto as possible, together with his pass book to the Accounts Office for obtaining loan consisting of a sum of whole rupees not exceeding twenty five per cent of amount that stood to his credit at the ends of the second year immediately preceding the year in which the loan is applied for.”

However, the loan has to be repaid with interest at 2% per annum within 36 months, either in lump-sum or in installments.

It is noteworthy that now for a loan taken by the subscriber of a PPF account on or after December 1, 2011 a rate of interest of 2% per annum is levied.

You can take a second loan against your PPF account before the end of your sixth financial year, but your second loan can be taken only once your first loan is fully settled.

 Withdrawals from my PPF account

Yes, you can make one withdrawal per year starting from your seventh year (through an application vide Form C). The first withdrawal can be done after the expiry of 5 full financial years from the end of the year in which your initial subscription was made.

The amount of withdrawal will be limited to 50% of the balance at credit at the end of the fourth year immediately preceding the year in which the amount is to be withdrawn, or the balance at the end of the preceding year, whichever is lower, as per the PPF rulebook.

Thereafter, you can make one withdrawal per year.

Example,

if you opened your PPF account on April 1, 2014, you can make your first withdrawal after April 1, 2020, and the amount of withdrawal will be limited to 50% of the balance as on – March 31, 2016, or the balance as on – March 31, 2019, whichever is lower; subject to loan taken on your PPF account.

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