PSE officers flay taxing of perks

Confederation says retrospective effect is bad in law

The National Confederation of Officers’ Associations, a national forum of executives of public sector enterprises (PSE), has criticised the addition of perks given to employees in the computation of personal income tax, as notified by the Central Board of Direct Taxes recently.

In a press release here on Saturday, Baby Thomas, president of the confederation, said the new rule was given retrospective effect from April 1. This was bad in law.

The notification said an employee living in a city having a population exceeding 25 lakh as enumerated by the 2001 census have to pay 15 per cent of his or her salary as rent recovery if the accommodation was provided by the employer. If it was less than 15 per cent, the difference was treated as perk and added to the employee’s salary for taxation.

“The valuation of perk is based on the salary of the employee and not based on the accommodation provided and the market rent of the accommodation. There is wide variation in the type of accommodation provided by different employers. As such, the principle adopted for valuation of perk is wrong,” Mr. Thomas said.

Many employees are not provided accommodation of the scale for which they were eligible. “The irony is that for these employees who have to be content with an inferior accommodation, the valuation of perk is made as though they are provided the accommodation for which they are eligible,” he said.

The valuation of perk should be based on the locality and the type of accommodation provided and not on the salary alone. In many cases, the rent recovery was even more than the market rent as these houses were old, ill-maintained and located in remote areas. The employees not provided accommodation were expected to pay 10 per cent of the basic pay as rent, in addition to the house rent allowance, to get tax exemption on the latter. For accommodation provided by the employer, the employees had to pay 15 per cent of the salary as rent recovery. The salary included allowances, perks and performance-linked payments. “This is gross discrimination,” Mr. Thomas alleged.

Many employees would now like to vacate the quarters provided and opt of private accommodation and draw the house rent allowance.

He demanded that the Central PSE employees should be treated on a par with Central government employees and the system of licence fee should be followed for rent recovery and valuation of perks.

On the taxation of perks on conveyance reimbursement, he said that even senior executives in Central PSE were not provided cars under the guidelines issued by the government.