Tax code - Bitter for employees and Butter for rich

Tax code - Bitter for employees and Butter for rich

Government has recently released the DIRECT TAXES CODE BILL, 2009. It is apparent that provisions of this Bill is actually against the interests of the government Employees. But at the same time it is very beneficial to business and affluent community.
As per the bill, the following items are taxable.
Commuted pension, gratuity & VRS emoluments. - The bill says these terminal benefits are exempted from Income tax only if the same are invested in a government approved saving scheme. As we are all aware such investments will have a lock-in period. Again when the said investment is withdrawn, the poor retired employee would land up in trouble as he is liable to pay tax. This is nothing but taking away whatever is due to the employees.
Presently contribution to GPF, LIC, PLI are exempt. Also as per the present income tax law, the final accumulated amount is also tax-free. However, the Bill seeks to amend this exemption provision. As per the proposals, any accumulated amount corresponding to the amount invested from date of enactment of the bill is taxable when the same is withdrawn. On one hand Government is giving paltry 8% on GPF. As the name suggests it is for the provident of an employee. This benefit is taken away now.
The following items which were not part of the income earlier will now become part of the Income.
Value of LTC.
Amount of encashment of un-availed Earned Leave.
Medical Reimbursement
Value of concessional Medical Treatment paid for or provided by the employers
I feel these are only reimbursements for the amount actually spent by the employee. The reason for including these reimbursements as income of the employee is best known only to the brain behind this bill.
Also, there is no mention about deduction of Principal & Interest component of Housing Loan. So, your dream home will ever become a DREAM.
On the other hand, these are all what the business and affluent community gets.
Loses can be carried forward for set off against future income for unlimited years
Wealth tax limit increased to 50 Crores from 30 Lakhs
Rate of wealth tax reduced from 1.0% to 0.25%
Financial assets like Shares, Bonds, etc are to be valued at lower of cost or market value
They can get deduction of any amount towards repair of Plant & Machinery.
The proposed Tax code is inhuman for the reasons that the medical reimbursements are proposed to be treated as income. When business men are allowed deduction towards repair of Plant & Machinery in addition to depreciation, why not the Employees for whom their physical body is their plant & machinery.
I feel the Government is not interested in the savings of the employees. However, for many a decade India is running a deficit Budget and the Government is badly in need of cheap money from the market. The savings schemes such as GPF, PLI etc., provide the government considerable liquidity at a very reasonable interest rate. If the Government wants to treat maturity Benefits of these saving schemes as income, it’s akin to killing the goose, which is laying golden egg every day.
The Government does not want their employees to retire peacefully. An Employee would save the money for retirement in anticipation of fulfilling his/ her dreams. Actually the second life of any person will start after retirement. But Government is not allowing this by treating the retirement benefits as income.
I hope our beloved technocrat Prime Minister MANAMOHAN SINGHJI will look in to the matter & set aside the anomalies created by the tabled DIRECT TAXES CODE BILL, 2009. Hope he will remove tax liability on
Commuted pension
Retirement gratuity
VRS emoluments
Matured value of GPF, LIC, PLI
Value of LTC
Amount of encashment of unavailed Earned Leave.
Medical reimbursement.
Shri.Govardhana Rao.H.S, Superintendent of Customs & Central Excise, Bangalore is the author of this article.