Central Govt Staff May Be Exempted

The buzz in government circles is that the new draft regulation on taxing of perquisites, prepared by the Central Board of Direct Taxes (CBDT), will not be applicable to central government employees.

According to sources close to ministry circles, the new rates (which have been described as arbitrary by many) will be applicable only to the corporate sector, while employees working in central government undertakings will be exempt from its impact.

The new tax rates as such have mixed benefits. While on the one hand it has prescribed flat rates on many items thus actually reducing the cost to the company - on the other hand it takes away low cost of loans for those who are enjoying concessional loans or even tax free loans for houses and vehicles.

The idea behind the entire exercise of taxing perquisites was to prevent tax evasion through innovative perquisites so that the value of the benefits would be determined on the basis of cost of employer.

Sources in the know said that since salaries of employees governed by the central government rules is all above board - "whatever is there is plainly visible on the salary cheque" - and their pay scales are lower than that of their corporate counterparts, is quite possible that they will be exempt from the new regulations - "at least that is what the buzz is about," said a source familiar with the developments.

So far as corporates in the public sector are concerned - these invisibles such as housing loans, vehicle loans, free or subsidized accommodation are never taken into account while computing salary. Most of these public sector companies actually reimburse phone bills and magazines bills without any limits.

However these do not show up anywhere as they are reimbursed on basis of vouchers presented and is, of course. Not taxed. This is totally unlike the private sector where all costs to the employer are added to compute the salary package.