B U S I N E S S

Now, pay tax on perks
New Delhi, December 19
The government is considering taxing most of the perquisites, including housing and conveyance, at the hands of the employees during this fiscal. According to official sources, the salaried class may have to bear an additional tax burden on their perquisites in the form of housing, conveyance, or monetary compensations in lieu of them, among other benefits.

Electronic benefit transaction cards are shown in this undated photo. As food stamps become an increasingly common currency in a struggling US economy, they are dictating changes in how even the biggest retailers do business. — Reuters

Air traffic picks up in October
New Delhi, December 19
In what could be soothing to the ears of the global airline industry, the rate of slowdown in business class traffic has declined in October from the previous month, the International Air Transport Association (IATA) said today.

Aviation Notes
IGIA on wrong runway
Delhi’s Indira Gandhi International Airport (IGIA) is the only venue in the country to have three runways for civil aviation operations. While two - subsidiary and runway 28 - are old, the new runway-29 at a cost of Rs 1,000 crore cannot be utilised properly owing to man-made lapses.

Investor Guidance
NRIs can’t hold resident bank a/c
Q My son is an NRI. He has both NRE and NRO accounts here. I want to gift some amount to my son and deposit the same in his NRO account. Can I do this? If yes, what is the limit of amount that I can gift him? What is the tax implication for him? My daughter-in-law is a NRI now. Is it mandatory to convert her saving accounts here to NRO account?

Now, pay tax on perks

New Delhi, December 19
The government is considering taxing most of the perquisites, including housing and conveyance, at the hands of the employees during this fiscal.

According to official sources, the salaried class may have to bear an additional tax burden on their perquisites in the form of housing, conveyance, or monetary compensations in lieu of them, among other benefits. The new levy may be applicable with retrospective effect from April 1 this year, the sources added.

The government may soon come out with a notification on the computation of the value of the housing and conveyance allowances to determine the tax liability.

The Fringe Benefit Tax (FBT), which taxed the perquisites at the hands of the employers, was done away with in the Budget 2009-10. Now with that levy gone, the government may tax the salaried class for the perks they receive for conveyance and housing among other benefits.

“The taxes for about nine months would have to be paid by the employees in case the rules come in effect from April 1, 2009. This could be an additional burden on them this year," said Ernst & Young tax partner Amitabh Singh. The sources further said the government may come out with a method for computing the levy on the perks given by employers, including government.

Other perks like traveling, free-food and non-alcoholic beverages provided by the employer, any gift or vouchers received by employees on ceremonial occasions, reimbursements for membership of a club tour and allowances would also come under the purview of this new tax plan. — PTI

Air traffic picks up in October

New Delhi, December 19
In what could be soothing to the ears of the global airline industry, the rate of slowdown in business class traffic has declined in October from the previous month, the International Air Transport Association (IATA) said today.

The airline yields also appear to have improved marginally, as premium travel numbers declined by 9.3 per cent in October compared with a 13.9 per cent fall in September.

Going by the latest figures of airlines around the world, the IATA said the economy travel figures also showed an improvement with a positive 1.3 per cent growth, compared with 0.9 per cent in September. It said passenger numbers on international markets expanded further during October.

Both premium and economy travel volumes rose around 6 per cent from their respective low points, but were still below early 2008 levels, it said, observing that “stronger world trade in the late summer appears to be generating more business travel,”IATA's premium traffic monitor said. — PTI

Aviation Notes
IGIA on wrong runway
by K.R. Wadhwaney

Delhi’s Indira Gandhi International Airport (IGIA) is the only venue in the country to have three runways for civil aviation operations. While two - subsidiary and runway 28 - are old, the new runway-29 at a cost of Rs 1,000 crore cannot be utilised properly owing to man-made lapses.

More than one kilometre of the 4.4-km runway is not fully visible during low visibility and foggy days owing to a 62-foot statue. Pilots have time and again protested against this deficiency, but the authorities have remained unconcerned.

“Our airlines have spent huge amounts on our training for operating the sophisticated category-IIIB gadget of the Instruments Landing System. But operations are risky and we do not want to endanger lives,” said commanders.

The statue has been on the spot for years. Why did the government permit construction of the third runway on this stretch? A Public Interest Litigation has already been filed.

Dual authority of the AAI and Delhi International Airport Limited (DIAL) is the cause for this malaise. The AAI has never been service-oriented and the private operator is only concerned about making money. In the difficult scenario, sufferers will be already harassed passengers. Two runways are not enough to handle multiple flights during foggy days. According to analysts, measures envisaged by the operators are not enough to reduce their woes.

VVIP Incidents

Human fallibility factor on VVIP flights has increased despite several precautions. It is said airport operations have increased manifold and there is lack of discipline and coordination among several agencies working at the airports.

It is a cause for concern. If in the civil and Air Force operations, situation has been murky, scenario on the general aviation has been depressing. The authorities have to act to reduce untoward happenings.

In the latest Prime Minister aircraft incident, there has been an error of judgement. The Minister of Civil Aviation has gone on record as saying only after the inquiry is completed, the motive or intention of the incident can be determined.

Investor Guidance
NRIs can’t hold resident bank a/c
by A.N. Shanbhag

Q My son is an NRI. He has both NRE and NRO accounts here. I want to gift some amount to my son and deposit the same in his NRO account. Can I do this?

If yes, what is the limit of amount that I can gift him? What is the tax implication for him? My daughter-in-law is a NRI now. Is it mandatory to convert her saving accounts here to NRO account?

— Ashok

A You can gift any amount without any limit to your son by crediting the same in his NRO account. As his father, by law you will qualify to be a relative of his and hence there will be no tax implication of the gift, either on him or on you. Regarding your other query, yes, it is mandatory for all NRIs to redesignate / convert their resident bank accounts into NRO. NRIs aren't allowed to hold resident bank accounts.

PPF account

Q I started depositing in PPF Scheme about 30 years ago (on March 18, 1980) and have requested for continuations. Now, my account matures on March 31, 2010. In view of the new tax laws (from 2011 being formulated and discussed by the government), how it would affect me? Till date I have successfully overcome the tax burden by investing in shares, MF, PPF and senior citizen schemes of the post office.

I am in a quandary whether to continue my subscription or terminate and withdraw full PPF amount and distribute amongst my wife, daughter, son-in-law and grandson.

— Jal Hansotia

A As per the code, any payment from PPF of accumulated balance, as on March 31, 2011, in the account of the person is not taxable when any part or whole therefrom is withdrawn.

This means the contributions made thereafter and the entire interest earned on the old balances as well as the fresh contributions are chargeable to tax. Life insurance premia also suffer similar, though not the same fate. Fortunately, the amount of accumulated balance, as on the March 31, 2011, in the account of an employee participating in an approved provident fund and any accretion thereto is not exigible to tax.

Perhaps the code would get suitably amended to rectify these situations. Since your account matures on March 31, 2010, you have time up to March 31, 2011, to opt for post maturity continuation with contribution. By that time you will come to know the final position.

If the authorities do not make any change, you may opt for withdrawal immediately after the Budget for FY 11-12 is presented to the Parliament.

Medical reimbursement

Q I am a government bank employee with 32 years of service and fall under 30% income tax bracket. My wife underwent heart surgery in October 2009 and 75% expenses were reimbursed by the bank. But now it has specified that Rs 15,000 is to be deducted from the reimbursement amount and then TDS will be deducted on balance of the reimbursement amount. This reimbursement is not a part of income then why is TDS being deducted in this regard?

— Yash Paul Sharma

A The bank has made payment to you under Section 17(2). Item (v) of the provision to this clause exempts reimbursement up to Rs 15,000 in a year for medical treatment for himself and his family members. The rest of the amount is taxable in your hands.

However, item (ii) of the same provision exempts: any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family

(i) in any hospital maintained by the government or any local authority or any other hospital approved by the government for the purposes of medical treatment of its employees;

(ii) in respect of the prescribed diseases or ailments, in any hospital approved by the Chief Commissioner having regard to the prescribed guidelines. If you are covered under this clause, you may claim the deductions while filing the returns.

The authors may be contacted at wonderlandconsultants@yahoo.com