The Hindu Business Line : An unreasonable load on employers

Section 192 requires deduction of tax at source from the head `salaries'. It has of course given the employees the option to disclose their other incomes as well to their employer but no one takes this seriously except while disclosing loss from house property which is the only loss they can disclose in order to pare down the TDS on salaries.

There is nothing in Section 192 requiring the employer to verify the tax-related investments of his employees and grant tax rebate. That role has been thrust on the employers by the annual CBDT circulars issued to facilitate TDS from salaries.

While this is beneficial to employees as they don't have to pay tax first and claim refund to the extent of tax rebate, the burden on the employer his enormous. His is an unenviable task and a thankless job. He takes this role stoically as if it is a public service. He hasn't even once, it seems, cried on the shoulders of the judiciary against this tyranny.

Excess tax

IS THERE a need for filing a refund application when tax has been paid in excess? - Anand Kumar, Bangalore

No. In terms of Section 143(1)(ii), the assessing officer (AO) shall grant refund, if any, due to the assessee on the basis of his return. No separate application therefore is required.

Refund query

CAN refund be claimed for tax deducted at source in excess of the actual tax liability where no return has been filed? - Anand Kumar, Bangalore

Obviously you cannot. But if there is still time for filing belated return in terms of Section 139(4) — before the expiry of one year from the end of the relevant assessment year — you still can claim refund on the basis of your return.

Raid rate

WHAT is the tax payable on income unearthed during an income-tax raid? - Sunder Singh Pahwa, Jalandhar

Earlier it was 60 per cent on the income unearthed for the block period — six assessment years preceding the previous year in which the search was conducted. But in respect of raids carried out after May 31, 2003, for these six years tax will not be imposed at a flat rate of 60 per cent but at the rate(s) prevailing in the respective assessment year.

The rationale for a flat rate of tax was to overcome the difficulty in pigeonholing the unearthed income to its year of origin. Now this difficulty would beset the assessment on the heels of a raid. The onus would be on the Department, especially when the tax rates differ.

Filing failure

WHAT is the penalty for non-filing of return? - Anand Kumar, Bangalore

As per Section 271F, a penalty of Rs 5,000 may become payable for failure to file return before the end of the relevant assessment year.

Sabbatical service

AT THE time of availing voluntary separation scheme (VSS), a person was on sabbatical, that is, leave without salary and seniority. Will this be included in the period of service for various tax exemptions? - B. Rathna Priya, Chennai

Nope!

VSS taxation

A PERSON received a VSS compensation of Rs 6,00,900 from his employer on the basis of three months' salary for each year of completed service. How much is exempt from tax? - B. Rathna Priya, Chennai

As per Section 10(10C) of the Income-Tax Act, the maximum amount of voluntary retirement or separation compensation exempt from tax is Rs 5 lakh. Therefore, Rs 1,00,900 will be taxable as salary income being the excess over the Rs 5 lakh exemption threshold.

Sick leave

AT THE time of VSS, earned and sick leave were encashed begetting around Rs 40,000. How much is exempt? The earned leave encashed was one-and-a-half months. - B. Rathna Priya, Chennai

There is no tax exemption for encashment of sick leave. The exemption is on only in respect of encashment of earned leave subject to the limits and conditions set out in Section 10(10AA). If the leave of one-and-a-half months relate to one single year, only one month's entitlement would be considered. In other words, leave entitlement in excess of one month per year would be ignored.

VSS plus gratuity

AT THE time of availing VSS, a person got a gratuity of about Rs 2 lakh at the rate of one month salary for every year of completed service. How much is exempt from tax? - B. Rathna Priya, Chennai

Presumably, the organisation this person worked for has had its own gratuity scheme which offered more than required to be offered by the Payment of Gratuity Act. The exemption, however, cannot exceed half month's salary for each year of completed service. Therefore, half of what has been received will become taxable.

Venture capital

WHAT does venture capital mean? - Parveen, Chandigarh

Venture capital traditionally has been associated with novel but promising projects. Apple Computers of the US was catapulted into the big league, thanks to the timely venture capital assistance. Even the redoubtable Microsoft Corpn got a leg-up from venture capital during its salad days.

The venture capitalist has the financial muscle which a technocrat promoter lacks. When they combine, it works wonders all round.

Biotechnology holds tremendous promise. But both the risks and investment spans are quite high. The venture capitalist really sticks his neck out. Indeed this is the reason why he is called a venture capitalist. He is the one with an eye on the long-term.

For those whose attention is riveted on the here and now, the business of venture capital has nothing to offer. The reward comes in the form of sizeable appreciation in the value of stocks he has invested in on the back of the success of the venture. He exits by offloading his stakes to the technocrat promoter or by offloading his investments to the pubic in an offer of sale.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

Article E-Mail :: Comment :: Syndication

Stories in this Section
Costing through three processes

An unreasonable load on employers

What to do when work stops working for you?

Have guts to go nuts and banish the buts

A pile on one side and the taxman on the other