Kuldip Kumar, Partner and Leader, Personal Tax - PwC India
Indian women have excelled in every sphere of career and are now playing vital roles in the corporate world. Companies with women in C-suites are among the most successful organisations. With the Union Budget 2016 round the corner a natural thought comes to the mind: would the Finance Minister consider introducing measures to cheer women taxpayers, help increase gender diversity in employment, or further the empowerment of women in the society. This article highlightssome of the expectations of women taxpayers from the upcoming budget.
- Currently, employer's contribution to superannuationfund in excess ofRs. 100,000 per annum attracts tax in the hands of the employee. Further, any early withdrawal from the superannuation fund or annuity payment received on retirement is fully taxable in the year of receipt. This results in double taxation on the same income. Thus,superannuation plans are losing relevance especially amongthe high-paid employees. The current tax regime on such contributions must be changed to avoid imposing tax on superannuation twice i.e. at the time of contribution (on amount exceeding Rs. 100,000) and at the time of actual receipt.
- Resident individuals having signing authority in any overseas accountsare required to report such accounts in their India tax returns. Companies generally give C-suiteexecutives signing authority in its overseas accounts as anintegral part of their role and responsibilities. To report all those accounts, especially the peak balances, is a real challenge for such individuals. The Government may consider limiting the reporting of such accounts to the extent of the account number only, while the tax authorities may obtain other details such as peak balance from the company, whenever or wherever needed.
- 'Employee Stock Options' (ESOPs) has emerged as a critical motivational and retention tool for companies looking for talent in a highly competitive market. It is also a way to remunerate employees without cash outflow. 'ESOPs' finds its unique importance in the context of 'Make in India' vision where start-ups and other small and medium enterprises need requisite skill set. Under the current regime, a notional benefit is taxed at the time of exercise (allotment of shares) while even the actual gain is not yet realised by the employees. In fact, the actual sale of shares later could even result in loss for the employees if the market value falls. Since the tax paid earlier cannot be set off against the capital loss, the employees suffer double loss - tax outgo and loss on sale of shares. The government must bring back the same taxation regime for ESOP as was prevalent earlier - before the year 2005-06. Under this regime, individuals would need to pay tax at the time of sale of shares and not at the time of exercise (allotment of shares). Tax rate would depend on whether the gain is short term or long term.
- Currently, income from rent on a property is taxed on full-year notional income, even if the property is let out only for a part of the year; a notional rent is considered on the remaining part of the year during which the property was self-occupied. Those employees who move for overseas assignments or those who have to relocate otherwise in the middle of the financial year often rent out their own place of stay. In such cases, they end up paying tax on the notional income for the period during which they were staying at the property. This causes a hardship. The provisions must be amended to tax only the actual rent.
- Currently, leave travel concession/ assistance is eligible for tax relief for up to two journeys taken in a block of four calendar years. Also, the relief is available for travel only within India. This relief must be extended to even foreign destinations and tax exemption must be allowed to be claimed for each financial year. This will incentivise working women to take their families on vacations every year.
- Other small steps may be taken to promote education of girl child, such as higher basic exemption for women, allowing separate deduction for deposits made in SukanyaSamridhiYojana (SSY), and allowing deduction on interest on education loan for girl child for an unlimited period.
- If some of these wishes are met, not only women taxpayers but other C-suiteexecutives too would benefit.