The Hindu Business Line : PSU employees irked by tax on company housing

New Delhi March 30 Employees of various public sector undertakings are on a warpath with the Government over the proposed amendment in the Income-Tax Act that creates extra liability on employees staying in company-provided houses on the basis of notional income.

What has peeved the workers further is that, while employees taking company-provided houses would have to pay taxes on notional income, their counterparts staying in private accommodation would in effect receive extra income in the form of house rent allowance.

All public sector employees, both Central and State, are affected by the move. According to Mr Brahma Mishra, Chairman of the Steel Executive Federation of India (SEFI), "a total of around three crore workers would be affected and the Government would be garnering close to Rs 5,000 crore through this extra taxation."

And in most cases, the nature of the industry requires employees to stay physically close to operations, as they may be needed at any odd hours depending on the situation. "It is not a luxury. In case of steel plants, power plants, mining, these are far from the townships. Company quarters are necessary to ensure that the employees are available on call," he said.

"The issue has already been brought to the notice of the Prime Minister by several MPs. All the trade unions in all the industries such as steel, coal, insurance, banking, telecom, power, oil and gas, and others would hold joint demonstration on April 26, when Parliament is reconvened.

"The problem is across the board and in effect the take home salaries of public sector employees will get reduced by several thousand rupees per month along with a retrospective tax liability of an average of Rs 1 lakh per employee," Mr Mishra said.

A perquisite

The problem has cropped up with the proposal to treat company provided housing as perquisite in terms of assessing the taxable income of individual employees.

As of now, the employees staying in employer provided houses used to pay the applicable licence fees under a predetermined formula based on the type of quarter. This amount was deducted from the salary per month. These employees do not get housing rent allowance.

Under the new provision, PSU officials said, an arbitrary 20 per cent of basic salary has been set as the benchmark value of the housing and this would be treated as perquisites while assessing tax. As a result, the tax liability would now be calculated by adding the difference between 20 per cent of the salary and licence fees with the taxable income. Since, the licence fees are less than 20 per cent of salary, employees would suffer across the board irrespective of what level they are working, Mr Mishra said.

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