Railway Passes To Be Tax-Free

The finance ministry is set to extend the tax-free status for railway passes for railway employees beyond the current fiscal.

The notification, expected soon, will set the revenue department's tax efforts back by at least Rs 500 crore in 2002-03. However, the railway ministry has contested the figure saying the outgo is far less.

The department has already twice extended the tax-free status for railway passes and privilege passes, held by the current and retired railway employees, for 2001-02 and 2002-03. The ensuing modification says the passes will continue to be tax-free till further notice.

The passes had become taxable by virtue of the perks taxation rules introduced by the finance ministry, with effect from the budget for 2001-02. However, the railway ministry had been representing against the tax.

The finance ministry had argued that the railway ministry had not factored in the revenue losses that accrue because of the facility. It had also argued that as per the definition of perks any facility provided by the employers are taxable and should attract tax liability. Passes for airlines' employees are also being taxed under the same clause.

The mid-course correction of perks taxation has become possible because unlike other direct taxes, this does not form part of the Finance Bill. But, according to sources there is a move to introduce an amendment to the Finance Bill to make perks a part of it.