The Life Insurance Corporation of India (LIC) has found a novel way to help its employees circumvent the tax on perquisites under the new Income Tax rules effective April 1, 2001.
This state-owned life insurer proposes to takeover the ownership of all four-wheelers given to its development people -- (those in the rank of senior divisional manager and above) -- in its name.
This will ensure that the tax liability is reduced sizeably for the employee, which varies depending upon the value of the vehicle.
In the process, LIC will probably be the only corporate entity to own as many as 6,000 four-wheelers on its books.
And this will come at a cost. The state insurer would have to shell out in excess of Rs 1 crore towards meeting the conversion charges in order to change the title on the car from the name of the employee to that of LIC.
Industry sources cited the example of the state of Maharashtra levying a charge of Rs 15,000 for the change in the title of the car.
According to the proposed scheme if implemented, the entitled LIC employee would pay just Rs 250 monthly for the use of the car on official basis.
This would also mean that LIC would take onto its books as many as 6,000 to 7,000 four-wheelers. No advances on mileage would be paid, and only actual expenses would be reimbursed on a monthly basis by LIC to the concerned employee.
All repairs and maintenance costs will be borne by the corporation. This would also save LIC the administrative hassle of maintaining the same.
The LIC management met with officers last week seeking their views, before putting the proposal to the board at the meeting on Saturday.
"We are still examining the scheme as we have to look into various aspects," said a senior management official.
He added that while the officers at LIC would stand to benefit, it also depends upon how much the Income Tax Authority will lose out in terms of taxes.
LIC officials explained that the tax liability to the employee would depend on the value of the vehicle and the amount of outstanding loan that remains. LIC offers eligible employees to take loans at zero interest rates for cars, which form a part of their package.
An employee who had opted for a Maruti 800 valued at Rs 3 lakh, would have a taxable income of Rs 30,000 calculated at the rate of 10 per cent of the value of the vehicle. This would be added to his total taxable income for the year.
