IS SUDDEN TAXES ON PERKS OF EMPLOYEES JUSTIFIED?

The news of imposition of fresh taxes on perks of officers and executives have created great dissatisfaction among the salaried employees. Earlier when FBT( Fringe Benefit Tax) was removed everyone heaved a shy of relief. The FBT was imposed on the corporate entity. But the withdrawal of FBT has come back as boomerang to officers community as a whole. The biggest surprise is that taxes will be imposed with retrospective effect of April 2009. Salaried employees have already budgeted and spent more money during last nine months and now taxes on their perks shall have to be paid within the balance three months period. This would be really harsh on concerned persons. The taxes on perks would be all pervading on salaried employees both in private sector and also in public sector. There are strong possibilities of imposition of this tax on the perks of government employees too, the fact has yet to be clarified by the government’s notification.

The Government of India is now all set to impose tax on all perks Viz. residential accommodation, conveyance, club facilities, on the provision of gas and electricity. This imposition would surely create hole in the pockets of officers. The enhanced tax on perks however would not touch common employees, who may not be entitled to such facilities.

The perks were always taxed. R.k. Mehrotra, former vice president of a multinational company who retired during year 2000 said “ perks like residential accommodation and conveyance were always taxed. This is nothing new. But now the rate at which taxes would be imposed is phenomenal. During our times conveyance with drivers were taxed at the rate of Rs 360 per month. But now entire salary of the driver would be added to the salary of the executive and taxed.” This is going to be torture surely.
A few years back during the time of Chidambaram FBT was introduced and taxes on the perks were imposed on employers .but during the 2009-10 Pranab Mukherjee done away with the provision. Every executives and their employers were happy. But now the announcement has created a short of stare . Now salaries given to the gardeners and even to cook and sweeper would be would be added to the officers concerned. It is to be seen how the burocrates and police officials of the state government take this imposition as generally a specified numbers of orderly are allotted at their residence.

Some of the organization provide regular tuition fee to the children of employees. Those would be considered as perks in the hands of employees and would taxed. This would create a condition where officers would enjoy all facilities but may not have enough to provide for their monthly domestic expenses. Why such harsh taxes are imposed. Is it to bring down consumption? Or bring down the money supply? According to Mehrotra for such harsh taxes executives are to be also blamed partially. Despite high salary some of the officers used to exploit the companies and government. Whenever they used to go on tour, a few executives used invite their relatives from time to time for lavish food and almost all laundry expenses were debited to company accounts. Perhaps Government did not want to remain mute spectator to such exploitation.

Whatever be the reason the government is moving from one extreme to the another now. This may not be taken easily by officers. There would definitely be representation by Chambers of commence and the officers associations if such harsh tax measures are imposed. Either companies would have to enhance salary further or the Government organizations would find out ways and means to camouflage the method of providing facilities. The valuation rules , yet to be announced by the Finance Ministry, are likely to be applicable with retrospective effect from April 1 last year. That is where the shoe is biting presently. The Government should have imposed the taxes on perks just after the budget was announced. Imposition of fresh taxes on perks, however judicious it may be, is going to be harsh action. . According to us before imposing such taxes Government could have discussed with the Apex Chamber informally. Justice delayed is justice denied. None would have created a stare if taxes on perks would have been imposed just after the budget. But now this is going to be a nagging problem which would require in-depth handling by Finance Ministry.

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