Praveen Kumar Basra

Reply

Under the new rules relating to valuation of perquisites, the value of perquisite in respect of interest-free or concessional loan provided to an employee or any member of his household is to be determined in the following manner:

Housing/conveyance loan at the rate of 10 per cent.

Other loans at the rate of 13 per cent.

This interest is a simple interest and is to be computed on the maximum outstanding monthly balance as reduced by the interest if any actually paid by him or any member of his household. In the instant case, the consumer loan, vehicle loan and festival advance have been taken from the employer. So has the overdraft facility been provided by the employer.

Therefore, the perquisite valuation will have to be restricted only to these loans and not to the loan taken from the employee credit society of the public sector bank.

The value of perquisite, however, will be restricted to 2.5 per cent of the vehicle loan, 13 per cent of the festival advance, 3.5 per cent of the overdraft against the term deposit and 2 per cent of the overdraft against NSC. These percentages are arrived at as the difference between the percentages as stated above and the percentage of interest charged by the employer bank. It is assumed that the employer charges simple interest.

Leave travel concession is exempt on the following basis, the excess of over which is taxable:

Exemption in respect of leave travel concession: The value of any travel concession or assistance received by an employee from his employer or former employer, for himself and his family, in connection with his proceeding on leave to any place in India is exempt from tax subject to certain conditions. The amount exempt under this provision can, in no case, exceed the amount actually spent by the employee.

`Family', for this purpose means:

Number of trips: The exemption is available in respect of two journeys performed in four calendar years commencing from calendar year, 1986. Where an individual does not avail such travel concession or assistance during any block of four calendar years, the value of travel concession or assistance first availed during the first calendar year immediately succeeding block of four calendar years, shall be eligible for exemption. This exemption shall be in addition to the exemption that will be available in respect of two journeys for the succeeding block.

This exemption is further subject to limits depending on the mode of conveyance and is available only to the extent spent. Children for this purpose shall not include more than two children. If, however, the children were born before October 1, 1998, the limit on the number of children shall not apply.

Query

Master Equity Plan, 1992 issued by UTI matured for payment on March 31, 2002. Investments in this scheme were eligible for the deduction under Section 80CCB. Investors have not received cheques from the UTI on the maturity until March 31, 2002.

Under these circumstances, can the income be taken into account for tax purposes only in the financial year 2002-2003 (assessment year 2003-2004)?

On maturity of units, which were eligible for deduction under Section 80CCB, is the benefit of indexation available in the computation of capital gain?

K. Balaji

Reply

On maturity of units, which qualified for deduction under Section 80CCB at the time of investment, the taxability would be as follows:

In respect of income, which is taxable under the head `Income from other sources', the assessee may follow either the mercantile system of accounting or the cash system of accounting.

If the assessee were following the mercantile system of accounting then, the income under this head in the instant case will have to being offered in the previous year 2001-02 (assessment year 2002-03), irrespective of the fact that the sum has not been received in that year.

If the assessee were following the cash basis of accounting then, the income can be offered in the year of receipt.

The income chargeable under their head capital gains, however, has to be offered to tax in the year in which the repurchase takes place or the scheme is terminated.

It is understood that this scheme has terminated on March 31, 2002.

Therefore notwithstanding the fact that the amount has not been paid by the UTI, since the scheme terminated on March 31, 2002, the same will have to be offered to tax in the previous year 2001-02 (assessment year 2002-03).

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