Income tax: Living allowance to employees while on tour exempt from tax

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Published: April 28, 2015 1:19:05 AM

Can I claim exemption against travel expense incurred by my brother?

I work as a technical director in a private company. On the successful completion of a project, my employer gave me a gift voucher of R50,000. Will it be taxed in my hand?
—Piyush Kumar
The value of any gift or voucher received by an employee, or by a member of his household, on ceremonial occasions or otherwise from the employer is taxable as perquisite. Where the value of such gift, voucher or token is below Rs 5,000 in the aggregate during the previous year, it is not taxed as perquisite. In your case, as the value exceeds R5,000,  the entire amount will be taxed as perquisite in your hand.

I acquired some land for R85,000 in May 1979. I plan to sell it for R12 lakh. What will be the cost of acquisition?
—Bhaskar Chatterjee
As per Section 55 of the I-T Act, 1961 (the Act), where a capital asset became the property of the taxpayer before April 1, 1981, the taxpayer has the option to take higher of the fair market value of the asset as on 1 April 1981 or the actual cost of the asset as the cost of acquisition. Thus, you may take R75,000 or the fair market value of the plot as on April 1, 1981, whichever is higher, as the cost of acquisition. Note that as per section 55A of the Act, where the assessing officer is of opinion that the value adopted by the taxpayer as on April 1, 1981 is higher than the fair market value as on that date, he can make a reference to the valuation officer for determining the fair market value of the property.

I work as a director in a company. As per the employment terms, my salary is net of taxes and my tax liability is borne by the employer. Will the tax paid by the employer be included in my income?
—Pramod Madan
As per section 10(10CC) of the Act, 1961, the tax actually paid by the employer on a perquisite provided to the employee [other than the perquisite provided by way of monetary payment within the meaning of section 17(2)] shall be exempt in the hands of the employee. In the light of certain judicial precedents, the tax borne by the employer on behalf of the employee constitutes a non-monetary payment and, as such, the same would not be included in your total income.

My query is regarding leave travel concession (LTC). Can I claim exemption against travel expense incurred by my brother?
—S Giri Rao
The definition of ‘family’ for the purpose of LTC includes brothers who are wholly or mainly dependent on the
individual. The exemption is not available if the family members travel without the employee, who is not on leave.
Also, the exemption is limited to the actual expenses incurred on the journey (limited strictly to air fare, rail fare and bus fare only). So, you can claim the exemption limited to the actual expenses incurred on the journey subject to the fact that your brother is wholly dependent on you.
My husband died in January 2015 while he was a director in a reputed company. The employer gave me a certain amount as ex-gratia compensation. Will the amount be taxable in my hands?
—Sunita Agarwal
The CBDT, through circular number 573 dated August 21, 1990, has clarified that a lumpsum payment made gratuitously or by way of compensation or otherwise to the widow or other legal heirs of an employee, who dies while still in active service, is not taxable as income under the Act. Further, reliance can be placed on decision of the Mumbai Tribunal in the case of ACIT vs Late Shri Anil Bhatia. Thus, it may be inferred that
such amount shall not be taxable
in your hands.

I am a salaried employee with a software development company and will be deputed in the US to work on certain projects. The company will be paying me an additional amount as ‘living allowance’ in US dollars. Will the allowance be taxable in
my hands?
—Aman Verma
Any allowance given to an employee, while he is on tour, to meet his ordinary daily charges is exempt from tax. However, the exemption is restricted to the extent of actual expense incurred and the unspent portion of the allowance is taxable in the hands of the employee. Thus, the living allowance shall be exempt from tax to the extent of the amount actually incurred and supporting documents are required to be provided to the employer.

The writer is founder of RSM Astute Consulting Group
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