The Finance Ministry has clarified that LPG subsidy, being transferred to the bank account of beneficiaries, will not attract income tax. There are around 15 crore LPG connections currently.

“To restate the position, the provision in the Finance Bill 2015 will not affect the LPG subsidy and other welfare subsidies received by individuals,” the Ministry clarified after change in the definition of ‘Income’ for the tax purpose raised speculation about LPG subsidy going to be taxed in the hand of beneficiary.

The Finance Bill, 2015, passed by the Lok Sabha last week, has expanded the definition of income that is taxable under the Income Tax Act, 1961, by inserting a sub-clause on subsidies, grant, cash incentive and duty drawback.

The Ministry said that Income Computation and Disclosure Standards (ICDS) for any class of assessees or for any class of income has already been notified. The ICDS is applicable to persons having income chargeable under the head ‘Profits and gains of business or profession’ or ‘Income from other sources’ and following Mercantile System of Accounting.

This is not applicable to individuals not having any income chargeable under the head ‘Profits and gains of business or profession’ and receiving LPG subsidy or any other subsidy which is for the welfare of the individual, the Ministry said while adding that the Finance Bill aligned the definition of Income with that provided in ICDS for this purpose.

A senior Finance Ministry official also said that this provision is for business income used for financing capital equipment on which depreciation is claimed. It means such an income will be taxable for the corporate.