Lic Not To Deduct Tax On Perks For Some Staff

The Life Insurance Corporation of India (LIC) has decided not to deduct tax on the perquisites of Class I officers (all executives from branch managers to executive directors and managing directors) and employees of Class III and IV belonging to the All-India Insurance Employees' Association (AIIEA). It issued a directive to this effect to all field offices yesterday.

The LIC directive follows the Karnataka High Court granting an interim stay of four weeks on the deduction of income tax on perquisites.

The Professional Worker Trade Union Centre of India Congress (PWTUC) and AIIEA had filed separate petitions in the Karnataka High Court in March on behalf of their members seeking a stay on the taxation of perquisites.

 

The high court on March 14 granted a stay on the deduction of tax on perquisites for a period of four weeks. Till a decision is taken by the court, LIC will not tax the employees identified above. It has requested that no tax be deducted from the salaries of Class I officers and Class III & IV employees of the association. The development officers, belonging to Class II, as well as those Class III & IV officers who are not members of AIIEA, are not covered under the directive.

The LIC Class I Officers Associations Federation also filed a petition in the Bombay High Court today. However, as LIC had issued a directive against deduction of taxes on perquisites the day before, the judge dismissed the petition filed on behalf of the members of the federation.

LIC had in November 2001 proposed to take on ownership of 6,000 four-wheelers onto its books in a novel way to help its employees circumvent the taxation of perquisites under the new income tax rules effective April 1, 2001. This proposal was, however, shot down by the finance ministry.

The Central Board of Direct Taxes (CBDT) had in September 2001 issued a notification to tax perquisites and allowances at source. Incidentally, the Andhra Pradesh High Court has ordered an interim stay on the deduction of tax on perquisites and allowances in January in respect of members of the All-India Bank Officers' Confederation (Aiboc). This followed a petition filed by the members of Aiboc questioning the constitutional validity of such a deduction.