Govt to net Rs 1,400 cr as tax from pay arrears to staff

The government will mop up Rs 1,400 crore this fiscal by taxing the second instalment of arrears due to central government employees, who were awarded increased salary by the sixth pay commission.

The first instalment of arrears (representing 40 per cent of the increased pay) was disbursed during financial year 2008-09.

The employees will also have to pay two per cent education cess on the total amount of the arrears.

"The total arrears for this fiscal is Rs 18,000 crore. The arrears that would fall in the tax net would be about Rs 9,000 crore. Barring the grade-IV employees, and according to calculations, around 15 per cent of this amount-- about Rs 1,400 crore (plus education cess) would go into government's coffers during this fiscal as tax," a senior Finance Ministry official said.

"The Central and State government and various organisations under them are advised to compute the correct tax liability of every employee on second instalment of arrears drawn by him and immediately recover the full tax liability along with education cess thereon at the rates in force," a recent CBDT circular asked all government employers.

Distribution of the remaining 60 per cent of arrears has already begun.

The I-T department has received the TDS on arrears from various government departments, while the rest would be received soon, the official said.

Source : Economic Times.

CBDT issues new circular on TDS from salaries

DEDUCTION OF TAX AT SOURCE —
INCOME–TAX DEDUCTION FROM SALARIES
UNDER SECTION 192 OF THE INCOME–TAX ACT, 1961

DURING THE FINANCIAL YEAR 2009-2010
CIRCULAR NO.1/2010

F.No.275/192/2009IT(B)]
NEW DELHI,

View the Circular

Central trade unions to oppose taxing of withdrawals from savings schemes

The central trade unions will press for shelving of a proposal, that wants to tax withdrawals from savings schemes, including provident funds, at the pre-Budget meeting with Finance Minister Pranab Mukherjee on January 14. “(The) Finance Minister has invited trade unions for pre- budget consultations on January 14,” All India Trade Unions Congress Secretary D L Sachdev told media.

Although the central trade unions are meeting here next week to prepare their charter of demands, he said, “we would definitely raise the issue of Exempt, Exempt Tax (EET) mode for savings schemes”.

The draft Direct Taxes Code (DTC), on which the government has invited comments from public, proposed to tax all long-term savings schemes at the time of withdrawal by the subscribers.

Currently, there are no taxes on long-term savings and pension schemes. Besides EET issue, Hind Mazdoor Sabha (HMS) Secretary A D Nagpal said, “We will also demand for higherincome tax slabs to provide relief to the working class.”

As part of the budgetary exercise, the minister meets the representative of different interest groups like economists, industrialists, trade unions etc to get their views on the budget. The trade unions, Sachdev said, would also press for the creation of a National Security Fund for urorganised workers in the country.

In view of unionists the funds should have a corpus of a size equal to three per cent of Gross Domestic Product of the country for the welfare of these workers.

The other major issue which could rock the meeting, is imposing service tax on the contributions made to the Employees Provident Fund scheme being run by the country’s largest retirement fund manager Employees’ Provident Fund Organisation (EPFO).

The issue came to light when some months ago, the Central Board of Excise and Customs slapped EPFO with a notice for not paying service tax on the contributions to these scheme. The scheme has around 4.7 crore subscribers across the country.

CBDT published perquisite valuation rules.

The perquisite valuation rules finally arrived on December 21 after a long wait. The fringe benefit tax (FBT) was strongly opposed by India Inc, but there is no doubt that it was beneficial to the employees — they did not have to directly bear the tax on many perquisites. The repeal of FBT meant uncertainity on taxation of perks. Thankfully, there are few changes to the valuation rules when compared to the rules that existed prior to the introduction of FBT. Rule 2BB, which deals with taxability of allowances, remains unchanged. If we take an overall view on employee benefits and allowances, a few items merit attention and this article will discuss them with the hope that they will be taken note of. The taxable values for provision of an automobile including the cost of its running and maintenance, and driver is nil if the car is used purely for official purpose. However, if the employer allows mixed use, the rule provides for deemed values towards personal use. These values have raised by 50% (there is also an apparent typo in one clause that may be rectified soon). Given that the earlier values were set many years ago, an enhancement of the limit accounting for the increase in fuel prices is justified. However, price increase is not limited to fuel only, prices have increased on many other household expenditure as well such as school fees, food, local transportation etc for which the exemption limits have not been raised. The exemption for transport allowance under Rule 2BB remains unchanged at Rs 800 per month although the limits for this allowance was raised by the Sixth Pay Commission (SPC) or government employees. A 50% increase is merited here as well. Education allowance for children continues to be a measly Rs 100 per month while the entitlement under the SPC is a princely Rs 1,000 per month with an additional Rs 3,000 per month as hostel subsidy. With education being a key concern, a higher limits would be welcome. Now consider the case of meals provided by an employer during working hours. This is a benefit that is statutorily provided to factory workers and generally provided in many other establishments as well. There are enough studies that show the positive co-relation between wholesome meals and worker productivity and, during the FBT regime, the entire expenses were exempted. Source : Economic Times.

6500-10500 pre-revised scales will get Rs 4600 as Grade Pay w e f 01.01.2006

Good news at last. The Ministry of Expenditure has sanctioned Rs 4600 Grade pay to the scales which were 6500-10500. This order is effected with 01.01.2006 and all arrears are to be recalculated and paid immediately. This was long outstanding issue and several departments in the revenue have called strike against it.

View the Notification

Consequent upon the order issued on 13.11.2009, the Inspectors, PSs and A.O. s of the Dept are to get the enhanced Grade Pay of Rs 4600, the proposed strike action scheduled on 26th of this month is likely to be withdrawn. However, it will be decided on 17th November after a meeting of the service associations.
STRIKe WITHDRAWN
As stated above, the scheduled strike on 26th November has been withdrawn.