Parthasarathi Shome, adviser to the finance minister, on Wednesday said a limit on the rupee sum contributed to superannuation funds might be considered (the current cap is in percentage terms).
He said that the whole issue of the fringe benefit tax on superannuation schemes could be reconsidered only when all such schemes were covered by the exempt exempt tax method.
He also categorically stated that "export of services" for shipping and airline industries would not come in the service tax net.
Shome was speaking at a seminar "Verdict on the Budget" organised by Business Standard and the Bombay Management Association in Mumbai.
The adviser to the finance minister made it clear that the fringe benefit tax would stay. However, the quantum of tax under various heads of fringe benefits was in the process of discussion with industry bodies. He also said the cash withdrawal tax limit would be "revisited".
Shome said the government might consider raising the limit of Rs 10,000 for contributions to pension funds. The ministry would also clarify whether DEPB benefits qualified as export incentives.
Superannuation schemes, which form part of the employees' cost to company package, are funds set aside by employers for employees' retirement benefit.
Many companies have been planning to wind up their superannuation schemes after the Budget announced that these schemes would fall in the fringe benefit tax net. The maximum amount an employer can contribute to the superannuation fund is 15 per cent of the basic salary of an employee.
"There is a cap on 15 per cent but in absolute terms it could be big money for those who earn high salaries," Shome pointed out answering a question on taxing superannuation funds.
The shipping and airline industries will heave a sigh of relief as the government is unlikely to bring all the services rendered to these industries in the service tax net.
Shome said if a service is in the form of exports, it will not be taxed. However, a service in the form of imports will attract service tax. "The broad principle is to tax services for domestic consumption," he said.
In other words, services, which are rendered abroad may not come the service tax. Shipping companies and airlines are likely to be asked to pay service tax on services availed of at Indian ports and not overseas.
The tax research unit of the ministry of finance is looking into this.
A member of the audience at the discussion here pointed out that while it was up to an investor to decide where to put his money under Section 80 C of the Income Tax Act, the sub-limit for contributing to pension funds under the erstwhile Section 80 CCC of IT Act remained capped at Rs 10,000. Shome said that this aspect would be looked at.