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A N Shanbhag
I am a small businessman. I have 11 employees working under me. I have taxable income and hence income tax/professional tax payers. Recently, I have employed a peon to run errands and prepare tea. I pay him Rs 1,500 per month. Naturally, he is not liable to pay income tax. Now do I have to deduct his salary to pay his professional tax? Do all employed persons have to pay professional tax or is there a ceiling after which professional tax is mandatory?
-- Prakash Bansal, Jogeshwari, Mumbai
I am surprised at your question. How are you handling the professional tax liability of your other employees? It is the responsibility of the employer to cut professional tax from the salary every month and pay it to the state government. The rates at which the tax is payable are as follows:
Salary per month Professional tax
Less than Rs 2,000 Nil
Rs 2,001-2,500 Rs 30
Rs 2,501-3,500 Rs 60
Rs 3,501-5,000 Rs90
Rs 5,001-10,000 Rs 120
Rs 10,001 and above Rs 150
Section 16 (iii) of the ITA allows a ``deduction of any sum paid by the assessee employee on account of a tax on employment''. You, as an employer, are required to take cognisance of this professional tax while deducting income tax at source on a monthly basis. You need not deduct tax in the case of handicapped employees. Similarly, senior citizens (persons of 65 years and over) need not pay tax.
I am having a bad problem with my income tax officer (ITO). This relates to my returns for FY 1997-98. In one of your articles, you had talked about a rebate for senior citizens u/s 88B, which could be availed by a senior citizen whose gross income does not exceed Rs 1.2 lakh. You had stated that this ceiling of Rs 1.2 lakh included losses under all the heads, including long-term capital loss. My ITO does not agree with this. He states that the long-term capital gains (or loss) should be treated as a separate block and thenormal income under all the other heads cannot be influenced by profit or loss under this particular head. Your article has caused a lot of heartburn for me. I could have escaped this tax by increasing my contribution to PPF, but decided not to do so, thanks to your misleading article. I protest.
-- T M Taraporewala, Mumbai
Section 80B(5) defines ``gross total income'' as the total income computed before making any deductions under Chapter VIA (80L, 80G, etc.). Section 2(24) defines ``income'' and includes under sub-clause (VI) any capital gains chargeable u/s 45.
It is absolutely clear that capital gains (or loss) is part and parcel of the income chargeable to tax. The ceiling of Section 88B is governed by this tenet. The tax rate chargeable to capital gains is governed by Section 48, which treats these gains as a separate block and gives concessions of cost inflation index and the concessional flat rate of 20 per centObviously, your ITO is erring by mixing up the two issues, one relatedwith the ceiling and the other related with the tax payable. My article had dealt with the method of arriving at the gross total income, which permits inclusion of capital gains, long-term or short-term, and segregation of the gains from the normal income only for the purpose of the special concessions. I stand by my views.
Thankfully, all this confusion is eliminated by the amendments effected by FA 1997, which allows for a tax rebate of Rs 10,000 to all senior citizens, irrespective of their total gross income or total income or income!
My normal taxable annual income is Rs 90,000. Every year, I strive to take benefit from PPF as much as possible, but end up contributing only Rs 30,000 since I require the rest of the money for my expenses. During the current year, I have earned a large amount of long-term capital gains. Since this is a separate block for income tax purposes, I have already paid the advance tax on capital gains as required. Now, what I desire to know is whether I can contribute anadditional amount of Rs 30,000 to PPF out of the funds available from the capital gains and claim rebate from the tax on my normal income?
-- Ramesh Tiwari, Dehradun
The answer to your question is an unequivocal yes. Contributions to PPF are required to be made out of income chargeable to tax. Section 2(24)(vi) defines ``income'' to include ``any capital gains chargeable u/s 45''. The fact that such an amount is treated as a separate block for computing income tax on capital gains does not change its character and colour as income chargeable to tax.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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