DECEMBER 29, 2009

By Subhashree Kishore

"WE are a poor nation and must learn to live accordingly…", J.M Keynes advised the Britons in late 1940‘s. The same holds true for us Indians. If as a part of the harried that is salaried class you have been frothing at the lips about the volte face in FBT, vide Notification No. 94/2009, dated 18-12-2009, KINDLY (no pun intended) DESIST.

Tossing it up like Hercules and Lord Atlas

Rapid development comes with industrialisation. Companies, the architects of this growth must be allowed to function in a hassle free environment. It doesn't do for them to be worrying about and footing enormous tax bills. Think of the man hours lost in calculating value of perks, compliance cost and hours billed by tax experts. The employee meanwhile draws his salary rather freely, savours his perks and walks home with a heavy purse and light heart. An unfair world indeed! Shifting the burden on employees and also insisting that dues of the entire financial year be recovered before the taxed can recover from the shock is a master stroke. We can now have employees lean, mean, and hungry working harder to earn more. That would push up productivity.

Resisting winds of change

Some reports have cried hoarse that the new rules are hardly so, and it is just a reinstatement of the pre-2005 position. These cries have nothing new in them. Tax laws are never fair or clear. Besides we need to say something for constancy. The student of tax will, as his counterpart did over a decade ago, struggle with 1.6 L capacity of engine and myriad calculation of personal and professional use of car and value of accommodation.

Making the assessee green (about the gills)

Another fact which has escaped the notice of most of the mourners is that the rules are environment friendly. While perks in form of gas, electricity, air-conditioners and cars are taxable, expenses on mobile phones and telephones, actually incurred on behalf of the employee by the employer, are exempted. So, WALK AND TALK to your heart's content. Sceptics may argue that lobbyists would have asked phones to be exempted because they are indispensable to business, are easy to account and would make up a large figure of expense to set off against company earnings. The booming telecom industry would be hit if employees treated company mobiles like plague. So let us play the deaf adder to these cries.

Coughing up for State coffers

In these times of global recession, it is the citizen, well, an endowed citizen who must support the government. We are grappling with food inflation -hovering around 18% and going strong, a yawning fiscal deficit and Keynesian economics of higher investment and lower taxes is not popular. Before you think of balancing the household budget you should give the State its due. Hence we should not complain that the exempted value for supply of free food and non-alcoholic beverages is fifty rupees per meal. At 26 working days a month it works out to about Rs.15000. A mere nothing compared to gift or gift voucher upto Rs.5000 received by employee or member of household on ceremonial occasions or other wise. Afterall a toaster or mixie gifted during Diwali is more valuable than daily tea and biscuits!

Inoculation

The Perks Tax Rules are a wonderful opportunity for the salaried to prepare for the Direct Tax Code when it is implemented. Of course it is under review and promises of ‘looking into all aspects' have been showered. The pragmatist should know what to expect. Once we have dyed ourselves in taxable value of perks, denial of relief for HRA, housing loan, EET and the like proposed in DTC will not stain us. Such far-sightedness is to be hailed, not hollered.

The Fine print

A close reading of the notification further proves that it is fair in many aspects. Consider these :-

While taxing value of any benefit or amenity resulting from provision of private journey free of cost or on concessional fare to employee or member of household, where employer is engaged in carriage of passengers or goods, railways and airline staff have been exempted. One hardly needs to explain that to charge the airfare or train fare to the employee will leave him cheerless.

In case of benefits availed from corporate membership of club, the initial fee for corporate membership has been excluded from valuation. Also all it requires is a note from the employer that the employee is forced to enjoy the privilege in line of duty and the latter can walk away perked up.

While calculating the value of benefit arising from transfer of movable asset, actual cost is reduced by cost of normal wear and tear at 20% on motor car and 50% on computers and electronic items is allowed under reducing balance method which means the burden reduces over the years.

Tax on ESOPs will now be paid by employee inducing employers to make them greater partners. Instead of parting with cash which is painful, employers can gift shares whose value may swing higher, lower or to zero.

If none of the foregoing can lift our spirits let us atleast remember that India is still a developing country and we are experimenting with everything from space voyage to probiotics (yes, the humble old curd), from nuclear energy to reality shows. The men at helm of affairs change often and they have not the benefit of experience or bane of accountability.

Without prejudice to anything said above and endeavoring to strike an optimistic note I would say

Take cheer friends, painless taxes are but 1.32 light years away!