The Hindu Business Line : Employee retirement option is not the same as VRS

A middle-aged employee of company (reluctantly) tenders his resignation under employee retirement option (ERO). Mind you, this is not VRS but ERO. Of course, he is not ditched. He is being given golden handshake. Can he claim deduction up to Rs 5 lakh out of his parting emoluments?

R.M. Subramaniam, email

No, as employee retirement option is not the same as Voluntary Retirement Scheme as rightly conceded by you.

Section 10(10C) confers exemption only for compensation received pursuant to a scheme of voluntary retirement which must be in accordance with the guideline framed for this purpose. I am afraid the retirement option does not conform to Rule 2B.

Interest capitalised

An amendment has been proposed to Section 43B making capitalised interest not deductible. Why has been done?

Rukminipriya, Chennai

The history of Indian financial institutions is replete with instances of debts having gone sour. Quite often borrowers seek rescheduling of loan and interest. And not uncommonly, the accrued interest thus far, which often assumes gargantuan proportions, is wily-nilly capitalised.

The shares received in the bargain are not exactly precious, but the harried financial institutions, caught as they are between the devil and deep sea, take them for want of better alternatives. The company promoters lose no sleep over the resultant dilution of control but instead heave a sigh of relief at being let off with a mere slap in the wrist.

The proposed amendment would extract a small price for such smugness.

What it means is payment of interest in the form of allotment of shares will not make the grade for deduction while computing business income.

Medical insurance

Is the service charge that I pay along with my medical insurance premium deductible under Section 80D?

P. Veerabadran, email

I think what you are referring to is the service tax which is routinely and blithely passed on to clients by the service providers. Service tax as far as a user is concerned is built into the invoice of premium and is, therefore, an integral part of the premium. It is very much deductible.

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

S. Murlidharan

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