Friday, February 26, 2010

Memorandum submitted to ED(MKTG) on Perquisites tax

20th February 2010

The Executive Director (Marketing),
L.I.C. of India.

Re : Taxation of perquisites in the hands of the employees for the year 2009-2010 INCOME-TAX (THIRTEENTH AMENDMENT ) RULES,200910 SUBSTITUTION OF RULE 3 AND INSERTION OF RULE 40F
Notification No. 94/2009/F.No.142/25/2009-S O (TPL),dated 18-12-2009

Dear Sir, 
As you are aware, our All India delegation has already discussed the above issue on 18th February 2010 with you in person. We again place our views on record.
Kindly refer your letter Ref: EDA/ZDB/930 dated 13-02-2010 issued in the above context wherein the Corporation has issued instructions to all offices to deduct Perquisite tax from all Marketing officials. In this connection we would like to submit as follows:- 

1) The car which is given to the Marketing Official is solely in the name of Corporation and is exclusively used by the officer for official purpose.

2) Corporation has allowed the officer to use the car for personal use up to the extent of 100 kms.

3) If at all the officer uses the office car for personal purpose he/she mentions it in his/her monthly mileage statement for which all the cost is borne by him/her.

4) The notification issued by the CBDT states that where the motor car is owned or hired by the employer and is used partly in the performance of duties and partly for private or official purposes of his own or any member of his household and the expenses on maintenance and running are met or reimbursed by the employer then, Rs. 1800 per month is added to the income (where engine c.c. does not exceed 1.6 litres) and Rs. 2400 per month is added to income (where engine c.c. exceeds 1.6 litres) and income tax is deducted at the appropriate rate which ranges from 10% to 30%. Most of our cars are with engine cc of 1.6 or less. The maximum income tax that would be deducted per month would be Rs. 540/- per month (30% of Rs. 1800). In the notification what is stated is maintenance (which would include reimbursement towards cleaning, reimbursement towards replacement of tyres and batteries, repairs to vehicles etc.) and running expenses up to certain limit, and not running expenses alone. Further, the reimbursement of running expenses for marketing officials up to SDM is 3000 kms every quarter (1000 per month) and for others it is 2000 kms every quarter (667 per month), which means that if the mileage of a vehicle is 12 kms. per litre than the marketing official gets reimbursement towards running expenses and other expenses of Rs. 4000/- p.m. (except for cleaning other expenses such as repairs, replacement of tyres, batteries etc are not regular expenses). Now as per above circular Rs. 1800/- and Rs. 2400/- for below 1.6 litres cubic capacity vehicle and above 1.6 litres cubic capacity vehicle respectively has to be taken as perquisites and accordingly Tax is to be deducted, which means out of Rs. 4000/- reimbursement given by corporation Rs. 1800/- or Rs. 2400/- as the case may be is used by the officer for personal purpose which is not true.

Further we would like to state that the perquisite circular is not applicable to Central Government employees. Since LIC is established under the Act of Parliament and is directly under the Central Government i.e. terms and conditions are all decided by the Government, the LIC employees should be also exempted from this perquisite circular, for that matter you can take the opinion from our legal department and decide.
In light of the above points we demand:-
A plea to CBDT should be made in light of these points to reconsider their decision.
OR seek legal remedy.
OR the Corporation should bear this perquisite tax. RBI is bearing perquisite tax of its employees. The Corporation is bearing the service tax on commission of agents and on premium of around 26 crores policies. Thus the marketing officials who are already in a financial crisis could get relief.

Another long lasting demand of the Marketing officials is increasing the reimbursement amount towards cleaning, servicing and repairs expenses. We, therefore, demand that the re-imbursement of cleaning expenses should be increased to Rs. 500/-p.m. The present limit of re-imbursement of servicing & repairs expenses should be doubled.
We are sure that you will consider our demands at the earliest.

Yours faithfully,
Ganesh Kamath

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