Gujarat Minimum wages have been revised from 1st Apr 2021 to 30th Sep-2021
Notification:-Gujarat VDA 01.04.2021 to 30.09.2021
Detail Industry-wise Breakup:- Gujarat Minimum Wages 1st Apr-2021 to 30th Sep-2021
SOURCES: PRAKASH CONSULTANCY SERVICES
Facts of the case:
As per provisions of section 10(5) of the Act, only that reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to anyplace in India. Nowhere in this clause, it has been stated that even if the employee travels to foreign countries, the exemption would be limited to the expenditure incurred to the last destination in India. Section 10(5) and the relevant rule is reproduced below:
Section 10(5)- exemption in respect of leave travel concession
| ** | ** | ** |
(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—
| (a) | from his employer for himself and his family, in connection with his proceeding on leave to any place in India; | |
| (b) | from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service, |
subject to such conditions as may be prescribed (including conditions as to the number of journeys and the amount which shall be the exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government;
Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel
Conditions for the purpose of section 10(5) as prescribed under rule 2 B of the Income-tax Rules, 1962
2B. (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding—
| (a) | on leave to any place in India; | |
| (b) | to any place in India after retirement from service or after the termination of his service, |
shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely:—
| (i) | where the journey is performed on or after the 1st day of October 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination; | |
| (ii) | where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first-class rail fare by the shortest route to the place of destination; and | |
| (iii) | where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October 1997, between such places, the amount eligible for exemption shall be:— | |
| (A) | where a recognized public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and | |
| (B) | where no recognized public transport system exists, an amount equivalent to the air-conditioned first-class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. |
Liability to deduct TDS:
There is a subtle line of demarcation between what is taxable in the hands of the assessee and what is the amount of estimated income in respect of which tax is required to be deducted at source by the employer.
Section 192 (1), which imposes tax withholding obligations on the employers in respect of payments for salaries, requires that tax deduction is made by the employer “on the estimated income of the assessee under this head (i.e., income from salaries) for that financial year“. Thus, the tax withholding obligation is clear in respect of “estimated income of the assessee” and not in respect of “taxable income of the assessee”.
There can be situations in which the employer genuinely and reasonably estimates income of the employees under the head salaries, and yet actual taxability of income under the head salaries of the related employees may be higher than the employer’s estimation.
Therefore, while examining the question as to whether the employer has properly discharged his duties under section 192, all that is to be seen is whether the employer has reasonably, or bonafide, estimated the income of the employees and deducted tax in respect of such estimated income.
Conclusion:
Under section 192 a duty is cast on an employer to form an opinion about the tax liability of his employee in respect of the salary income. While forming this opinion, the employer is undoubtedly expected to act honestly and fairly. But if it is found that the estimate made by the employer is incorrect, this fact alone, without anything more, would not inevitably lead to the inference that the employer has not acted honestly and fairly. Unless that inference can be reasonably raised against an employer, no fault can be found with him. It cannot be held that he has not deducted tax on the estimated income of the employee.
Facts of the case:
Residential status: On a worksheet submitted by the assessee along with Form-16, the assessee claimed that he comes under the NOR (Not Ordinarily Resident) category for the assessment year 2010-11 based on particulars of the days, in which he stayed in India from 1-4-2002 to 31-3-2009, i.e., for 401 days only which was well within 732 days required for a regular resident.
He was given 5500 stock options, when he joined Google Inc, California, USA, in June 2005. Thereafter, in the year 2008, he left the USA and relocated to India and further joined Google India Private Limited, an Indian company fully owned by the parent company Google Inc. USA.
Accrue and arise of income outside India: During the assessment year 2010-11 under consideration, he sold 900 stock options, and still, he owns 2100 stock options. Hence, the entire 900 options sold in the assessment year 2010-11, clearly came out of the lot of 4583 options that had already vested before his move to India, and transactions were initiated and executed through Smith Barney Inc., based in the USA and the proceeds were wired directly to his old account in the USA bank.
Thus, the amount of Rs. 1,19,49,709/- under “stock options” mentioned in Form-16 pertains to the sale of stock options that were granted in the USA while he was working in Google Inc., USA and vested while he was living in the USA. The same was sold through a US-based company and the cash proceedings were directly sent to his old account in the USA bank.
Analysis of the above facts:
As per Section 5(1) of the Income-tax Act, the assessee comes under the category of NOR assessee and is liable to pay tax only on income earned in India.
Section 5(1) excludes “income which accrues or arises outside India” in the case of Not Ordinarily Resident assessee.
Assessee, in the above case, is a “non-resident”. The word “non-resident” is defined in Section 115C(e) of the Act. It means an individual, being a citizen of India or a person of Indian Origin who is not a “resident”.
Further, the employee acquired asset viz., ‘stock’ from the employer’s stock option scheme, when he was serving abroad in a parent company prior to the assessment year 2010-11 when he was non-resident.
Without considering this fact his employer erroneously treated the sale proceeds of stock options as ‘perquisites’ and included that as income in Form-16.
Whether it is correct to say that based on computation made in form 16 the claim of an employee shall be rejected and income so earned on the sale of stock options shall be treated as income of the employee for AY 2010-11?
It is not correct to say that particulars of income shall be added to the assessment of the employee because the employer has deducted TDS on the same. The NOR status & the purchase of stock option of the assessee is a mixed question of fact & law and because of this fact also, the fact that the employer could not go into the exact residential status of its employee, which involves complicated questions of law viz., interpretation of Section 6(6) (a) and 5(1) (c) of Income-tax Act, as a measure of caution, erroneously deducted income tax for the said exempt income of Rs.1,19,49,709/-. Thus, the same can not be the only ground to add the income in the assessment made by AO.
Facts of the case:
The assessee in a development office of LIC. The issue that arises here is – whether the incentive bonus received by DO-LIC is a salary income. If so, whether amount so received by him is entitled to a separate deduction?
Whether 30 periods of incentive bonus were to be excluded from the definition of ’emoluments’ under section 17?
Whether incentive bonus being salary, the assessee was entitled to any deduction excess/different from standard deduction allowable under section 16(1)?
Analysis of fact:
Whether any expenditure is allowable in the computation of income or any receipt has to be added to income only after providing for the expenditure is a matter to be found in the statute, that is, the income-tax Act. The scheme of the Act is compartmentalization of income under various heads and computation of the taxable portion strictly in accordance with the formula of deductions, rebates, and allowances provided therein.
The first step in this regard is to identify the head under which the income is assessable and Deductions and allowances are specific for each head of income.
The definition of “salary” under section 15 of the Income-tax Act, 1961, is so wide and is only an inclusive one taking in all receipts from the employer in the form of wages, commission, bonus, profits in lieu of or into the employee towards consideration for services rendered in the course of employment comes within the description of “salary” which includes perquisites as well. The definition of salary as provided under section 15 is reproduced below:
(a) any salary due from an employer or a former employer to an assessee in the previous year, whether paid or not;
(b) any salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
Explanation 1.—For the removal of doubts, it is hereby declared that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due.
Explanation 2.—Any salary, bonus, commission, or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as “salary” for the purposes of this section.
(1) “salary” includes—
(i) wages;
(ii) any annuity or pension;
(iii) any gratuity;
(iv) any fees, commissions, perquisites, or profits in lieu of or in addition to any salary or wages;
(v) any advance of salary;
(a) any payment received by an employee in respect of any period of leave not availed of by him;
(vi) the annual accretion to the balance at the credit of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule;
(vii) the aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof; and
(viii) the contribution made by the Central Government or any other employer in the previous year, to the account of an employee under a pension scheme, referred to in section 80CCD;
Meaning of bonus to DO-LIC:
The incentive bonus is a percentage of the premium received by the LIC of India for the business canvassed through the Development Officers,
It is not the reimbursement of any expenditure and is not even linked to expenditure, if any, incurred by the Development Officers.
Further, in cases where the remuneration otherwise receivable by the Development Officers is in excess of 20 percent of the net premium, then the Development Officer is not entitled to any incentive bonus.
Conclusion:
It is an additional payment and is nothing but a salary coming within the meaning of section 15 of the Act and the Development Officer is not entitled to any deduction over and above the standard deduction.
Computation of salary income of a Czech national employed with Skoda Auto AS, a company incorporated in Czechoslovakia and is currently under deputation to Skoda Auto India (P.) Ltd:
Income tax return filed on : 31-7-2006,
| Basic Salary:
Bonus: Total Salary: |
Rs. 47,31,650
Rs. 8,81,760 Rs. 56,13,410 |
Deductions:
| Net Salary: | Rs. 26,68,631 |
| Taxable allowances:
Taxable perquisite: |
Rs. 17,74,558
Rs. 25,79,856 |
| Taxable income under the head salary: | Rs. 70,23,050 |
The explanation for deduction of social security charges: As regards the social security contribution, it was explained that Skoda a.s. has made a contribution to the social security plan for the assessee in the home country.
It is admitted position that domestic law of the Czech Republic lays down a compulsion whereby all citizens of the Czech Republic are required to contribute to the social security plan, regardless of the fact whether they are working in the Czech Republic or any other place.
There is a thin diving line between diversion of income and application of income as explained below:
Diversion of income: Income is received by a person other than the person who is entitled to it. The recipient, later on, diverts the income under a pre-existing title to the person who is actually entitled to it. It is the diversion of income by overriding title.
In such cases, income is not taxable in the hands of the person who first receives it. The tax is payable by the person to whom income is diverted by overriding title.
Application of income: Income is received by the person who is actually entitled to it. He is made chargeable to tax.
In order to decide whether a particular payment is a diversion of income or application of income, it has to be seen whether the disbursement of income is a result of the fulfillment of an obligation on him or whether income has been applied to discharge an obligation?
In the first case income is not taxable in the hands of the assessee but in the latter case same consequences to law not follow and income is taxable in the hands of the assessee recipient.
Analysis of present case and conclusion:
In the above case, the assessee had no discretion in the matter of social security charges contributions and the assessee does not have any enforceable right over it.
Also, no benefits accrued to the assessee, under this social security plan, in the relevant financial year.
Thus the payment is not taxable as the employee does not have a present enforceable vested right in the contribution.
Also, in the case of Gallotti Raoul v. Asstt. CIT, it was highlighted that only net income was chargeable to tax after adjustment of the French social security charges as was the assessee’s case.
Thus, the facts of this case show that the amount to the extent of the social security plan never reaches the assessee as his income, and, therefore not taxable.
Also, the non-existence of provision for deduction either under section 16 of the Income-tax Act or in the tax treaty between India and the appellant’s home country is immaterial in this case.
Computation of salary income of a Czech national employed with Skoda Auto AS, a company incorporated in Czechoslovakia and is currently under deputation to Skoda Auto India (P.) Ltd:
Income tax return filed on : 31-7-2006,
| Basic Salary: | Rs. 47,31,650 |
| Bonus: | Rs. 8,81,760 |
| Total Salary: | Rs. 56,13,410 |
Deductions:
| Net Salary: | Rs. 26,68,631 |
| Taxable allowances:
Taxable perquisite: |
Rs. 17,74,558
Rs. 25,79,856 |
| Taxable income under the head salary: | Rs. 70,23,050 |
Meaning of the term tax equalization policy and hypothetical tax:
This deduction on account of hypothetical-tax liability is made under tax equalization policy, which, in substance, restricts the tax liability of an employee in India to the tax liability which the employee would have incurred in their home country. For example:
| Particulars | Tax liability which the employee would have incurred in his home country,i.e Czech republic in the present case | Tax liability of an employee in India | Impact analysis |
| Tax rate | 20 percent of salary income | 30 percent of salary | Actual tax liability paid by the employer company. (it is the employee tax bill is paid by the employer and same will be taxable under the head salary income as a prerequisite of employee) |
| Whether tax equalization policy applicable | Yes | As tax rate in the country of employment is more. | |
| Tax liability to be borne by the employer | 10 percent of salary
(Being 30% tax in India Less 20% tax in home country) |
This is the tax liability of employer company under the term of employment and also paid employer company and hence, not a prerequisite income of the assessee employee. | |
| Tax liability to be paid to employee assessee | 20 percent of salary income | 20 percent of salary income | Hypothetical tax bill under the tax equalization policy of the employer company and reimbursed by an employee to the employer under the term of employment. Thus, income to this extent never accrue to an employee but received by him as an employer has already paid taxes at increased rates. Thus, this amount needs to be deducted while computing a taxable perquisite. |
| The net effect of the policy | tax equalization | tax equalization | Objective achieve |
Thus, what is deducted on account of hypothetical-tax is not a reduction of basic salary, but it is only restricting the tax liability of the employee as borne by the employer.
When a deduction to be made from the salary on account of hypothetical-tax, whether this deduction to be allowed while computing the basic salary or is it to be allowed at the stage of computing perquisite of tax on the salary being borne by the employer?
The hypothetical-tax liability thus only reduces the tax prerequisite of the employee and not his income. The deduction, therefore, should be made at the stage of computing the tax prerequisite and not the basic salary.
The view, that hypothetical-tax is not one of the three deductions permissible under section 16, and, accordingly, the deduction cannot be granted on account of hypothetical-tax from the basic salary is wrong as the hypothetical tax is not a tax liability and thus not an income of the assessee employee.
The explanation for deduction of hypothetical tax: This deduction was on account of hypothetical-tax under tax equalization policy and, in accordance with Tribunal’s decision in the case of Jaidev H. Raja v. Dy. CIT [IT Appeal No. 2021 (Mum.) of 1998], taxable base salary is to be reduced by the amount of hypothetical-tax.
In the case of Jaydev H. Raja (supra), as per the tax equalization policy framed by the employer company i.e., Coca Cola India Inc., employees were guaranteed a net of tax salary and the company was to bear all actual taxes imposed on the employee’s assignment income. The employees had to reimburse the company that part of the total tax liability which he would have paid had if he worked in Atlanta.
Thus, the deduction on account of hypothetical-tax is justified because the liability of the employer will be restricted only to the extent of additional liability over and above what would have arisen had the appellant been in the Czech Republic. Therefore, the amount of Rs. 20,21,281. which has been reduced as hypothetical-tax, is not accrued to the appellant at all and the same is not taxable.
The following Act of the Legislature of the State of Haryana received the assent of the Governor of Haryana on the 26th February 2021 and is hereby published for general information
If any employer contravenes the provisions of section 3 of this Act or of any rules made thereunder or of any order in writing given thereunder, he shall be guilty of an offense punishable with the penalty which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees and if the contravention is still continued after conviction, with a further penalty which may extend to five hundred rupees for each day till the time contravention is so continued.
Section 4 (Recruitment of local candidates)
if any employer contravenes provisions of section 4 or of any rules made thereunder or of any order in writing given thereunder, he shall be guilty of an offense punishable with the penalty which shall not be less than fifty thousand rupees but which may extend to two lakh rupees and if the contravention is still continued after conviction, with a further penalty which may extend to one thousand rupees for each day till the time contravention is so continued.
Section 5(Exemption)
If any employer disobeys any order in writing made by the Designated Officer under section 5, he shall be guilty of an offense punishable with the penalty which shall not be less than ten thousand rupees but which may extend to fifty thousand rupees and if the contravention is still continued after conviction, with a further the penalty which may extend to one hundred rupees for each day till the time contravention is so continued.
Notification:- THE HARYANA STATE EMPLOYMENT OF LOCAL CANDIDATES ACT, 2020
Karnataka Govt has revised & Increase in Cost of Living Allowance (DA) payable in Scheduled Employment under Minimum Wage Notification for the period from 01/04/2021 to 31/03/2022
| Industries/Category | Notification |
| Shop & Establishment 👉 | Karnataka MW 2021-2022-Shop & Establishment-compressed |
| Hotel & Restaurant 👉 | Karnataka MW 2021-2022- Hotel-compressed |
| Security 👉 | Karnataka MW 2021-2022 Security |
SOURCES: PRAKASH CONSULTANCY SERVICES
Budget Highlights relating to Income Tax
The provisions of Finance Bill, 2016 relating to direct taxes seeks to amend the Income-tax Act, 1961 (‘the Act’) , the Finance (No.2) Act, 2004, Finance Act, 2013 and Finance Act 2015, in order to provide for –
A. Rates of Income-tax
B. Additional Resource Mobilisation
C. Widening of Tax Base and Anti-Abuse Measures
D. Measures to Phase Out Deductions
E. Measures to Promote Socio-economic Growth
F. Relief and Welfare Measures
G. Ease of doing Business & Dispute Resolution
H. Rationalisation Measures