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No tax on food coupons
Kanu Doshi | May 19, 2008 11:46 IST
My employer issues the daily food coupons to us. During the last three years we have received food coupons worth Rs 250 per day. For the current financial year, it has been increased to Rs 350 per day. Is this benefit taxable in our hands?
-- Cheryl Ahuja
The Central Board of Direct Taxes has clarified that employees are not to be taxed when they are issued non-transferable food coupons usable only at food outlets.
There is no limit laid down by law on the amount that can be paid through such coupons. Similarly, the employer is also not chargeable to Fringe Benefit Tax on the same. Thus, the increase in the amount has no tax implications for you or for your company.
My wife earns about Rs 1 lakh (Rs 100,000) every year through her investments and cooking classes. Should she pay tax or will her earnings be clubbed with my other income of Rs 3 lakh (Rs 300,000)? What type of income tax returns need to be filled, if any?
K L Arora,
Taxability of your wife's income will depend on the source of her investments. If the investments are from gifts given by you, her income will be added to yours. You will have pay income tax on it. Her income from cooking class will be taxed only in her hands.
If the investments were made with money received through will or as a gift from her parents, relatives, her marriage; it will be taxable only in her hands. Income up to Rs 1.45 lakh (Rs 145,000) for last financial year and up to Rs 1.85 lakh (Rs 185,000) for financial year 2008-09 is exempted in the hands of women taxpayers.
Thus, the income is well below the minimum exemption limit. When her income becomes taxable, she will have to file her tax returns.
I am a salaried person and my employer mentions cost to company (CTC) and deductions. I wish to know what deductions are allowed from the CTC?
-- Nilesh Shah
The deductions will be based on components of your CTC. For instance, contributions to gratuity, pension and PF are generally included in the CTC, but are not taxable in the hands of the employees. For a salaried person, the basic pay and allowances such as dearness are taxable.
The exemptions available include: conveyance allowance up to Rs 9,600 per annum, house rent allowance subject to certain conditions and limits, leave Travel Allowance twice in a block of four years, children education allowance up to Rs 1,200 per annum for each child (maximum two) and medical reimbursement up to Rs 15,000 per annum.
Perquisites are generally taxable and also cost the employer. Tax incidence can be reduced through investing in tax saving instruments like PF, PPF, NSC and ELSS, specified in Section 80C subject to a maximum of Rs 1 lakh.
Premium for medical insurance for self and family also qualifies for additional deduction under Section 80D up to Rs 15,000. Fringe benefit tax payable by employer for perquisites granted to employees also adds to the cost to the company.
My father had bought shares in blue-chip companies over 10 years ago. The ownership of those shares has transferred to me recently. If I now sell the shares in the next one year, will there be capital gain tax on my income? Can I sell them to my brother-in-law in an off-market deal since he is willing to pay a higher price?
-- Jyotsna Kotian
Under Section 2(42A) of the Income Tax Act, 1961, since the shares were held for over 10 years by your father, the capital gains on sale by you will be treated as long-term and eligible for exemption under Section 10(38), provided you sell the shares through a recognised stock exchange and pay securities transaction tax at the time of sale.
Your sale through an off-market deal will lead to taxation. Hence, it's best to avoid it.
The writer is a chartered accountant.