Bhadkamkar A. V.

I am handling Salaries and Wages Administration for over 50 years. I feel that the experts working in the Finance Ministry, while recommending Income Tax structure, ignore the anomaly / administrative difficulties faced by the salaried employees / employer. The details are as under.

1. MEDICAL REIMBURSEMENT:

The reimbursement of medical expenses upto Rs.15000/- in a F. Y. is exempted since F. Y.1997-98. Although the cost of medical treatment is increasing day by day, the Govt .has not increased the limit in 18 years. Even the Consumer Price Index No. published by Labour Commissioner’s office in Maharashtra for Mumbai city, has increased from 8640 in Feb.1997 to 33442 in Feb.2016(24802 points up,about 300 times) during this period. Probably all involved in preparing and passing the Budget are not aware about rise in costs of medical treatment, being lucky to get free medical treatment, for doing the noble service to the people.

2. LEAVE TRAVEL ASSISTANCE (LTA):

The amount received on account of Leave Travel Assistance is exempted, subject to cost of 2nd class A.C. fare, only twice in a fixed block of 4 years. This provision is in force from F.Y. 1988-89. It is very cumbersome to keep a track of when an employee has claimed LTA in a block of 4 years. In addition most of the establishments LTA is payable on the basis of calendar year. It may happen that an employee will claim LTA in say in May 2015 and January 2016 for two calendar years but in one F.Y. Further if an employee claims LTA every year and even if submits proof for expenses, he will get exemption only for two years.

The exemption is allowed only to the extent of fare. What about the expenses of Lodging, Boarding, Sight seeing etc? Perhaps the persons who are making these rules are getting all such facilities free. So they may not be aware that the public has to spend money on such accounts.

The workers or clerical /supervisory staff are claiming LTA to meet additional expenses without going out to any place. It is, therefore, taxable income. A fixed amount with ceiling like medical reimbursement, should be free of Income Tax, without hassle of keeping records for certain no. of years. Some establishments are paying only about Rs3000/- as LTA to workers/Staff.

3. EDUCATION ALLOWANCE:

Same is the case of Education allowance. The exemption amount is unchanged for many years in spite of the cost of education increasing day by day. The exemption for education of a child is only Rs.100/- p.m. and maximum of Rs.200/-p.m. for two children. This is irrespective of whether the child is studying in KG class or in college.

Is it not a ridiculous amount of exemption provision?

4. LONG SERVICE AWARD:

Many establishments pay some amount to employees who have rendered service for 15/20/25 years, as a recognition of long service. Although this amount is for Many years of Service, it is considered as income in the year it is paid. e.g. If an employee receives say Rs.15000/- for completing 20 years of service, it is taxed as income in one year. This should not be considered as income if it is paid at the rate not exceeding certain reasonable fixed amount or certain no. of days salary per year of service.

5. DEDUCTION UNDER SECTION 80C

The amount invested in PF, NSC, LIC, ELSS, PPF, Repayment of principal amount of Housing Loan, Child’s tution Fees etc are all included in the maximum limit of Rs.150000/-. This limit is for all whether the person’s income is 3/5/10/20/30/50 lakhs. I suggest that the ceiling under 80 C should be maximum % of income before deduction subject to _______ /- maximum.(e.g. say 25%. In such case person having income of 10 lakhs can invest upto Rs.250000/- and one whose income is 50 lakhs can invest Rs.1250000/- )

6. STANDARD DEDUCTION:

Before the F.Y. 2005-06 the salaried employees were getting deduction from income in the form of Standard Deduction whereas the businessman / professionals were not eligible for the same. A person having professional / business income gets deduction from income for expenses on Telephone, conveyance, petrol, stationary, postage and many more. But the salaried employee, after scrapping Standard Deduction, is not allowed these expenses from his income. If income of a salaried person and that of a professional is same, salaried person will pay more income tax since he will not get deduction for expenses of Telephone etc. mentioned above. Before F. Y.2005-06 both the persons – salaried employee and a professional – were comparable. Scrapping Standard Deduction has adversely affected the salaried employees.

In view of the information given above and since the Income Tax is deducted at source from salary, you may agree that the salaried employees are only the highest sufferers.

The necessary corrections in Budget proposals, administrative instructions etc. by The Honourable Minister shall cheer up the hard pressed salaried employees.

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  • CA. Subhash Chandra Podder

    good.

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