Taxation
Economy & Nation Exclusive
No income tax on LPG subsidy, says Finance Ministry
The Finance Act treats all subsidies, grants, cash incentives, duty drawbacks, waiver, concessions and reimbursements as taxable income. However, the Finance Ministrty has claried that there would be no income tax on LPG and other welfare subsidies for individuals
 
UPDATE: Updated to include clarification from Finance Ministry
 
First, the union government made it mandatory for every consumer to avail subsidy benefit for the liquefied petroleum gas (LPG) refill through bank accounts. However, to the shock of most taxpayers, who are receiving such subsidy, the amendment in the Finance Bill has termed this as income, and thus liable for taxation. Earlier, experts were divided whether such subsidy was taxable under the Income Tax (I-T) Act as there was no clear guidance from the authorities. Late in the evening (after this article was published), the government clarified that provision in Finance Bill 2015 won't affect the LPG subsidy and other welfare subsidies received by individuals.
 
The Finance Bill, 2015, as passed by Lok Sabha on 30th April has specified that subsidies no longer would be treated as capital gains, but as income (revenue receipt). The amendment in the definition of 'Income' under Section 2(24) in the Finance Bill, 2015, says, "A new sub-clause (xviii) is proposed to be inserted in Section 2(24) to provide that assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assesse [other than one considered under Explanation 10 to Section 43(1)] would be included in assessee's income."
 
This in other words any subsidy that is not reduced from the actual cost of the asset in view of provisions of Explanation 10 to Section 43(1) will be taxable as revenue receipts of the assessee.
 
This includes the subsidy for LPG refill as well. However, there are still some flaws in the taxability of subsidy for LPG. Some experts feel that the consumer pays in full towards buying the LPG refill at market price, for which she may already be paying income tax. Since the government is simply reimbursing the subsidy amount, it may lead to double taxation. 
 
For example, for a LPG refill the consumer pays about Rs650 as full market price from her pocket. Next the government reimburses around Rs200 (actual amount may differ), the difference between subsidised price and the full market price. The consumer may already be paying income tax on the total amount of Rs7,800 (Rs650x12 LPG refill per year). If she receives Rs2,400 as subsidy, then as per the Amendment in the Finance Bill, her tax liability would increase by this amount. 
 
So in the end, the consumer would end up paying income tax on Rs10,200 (Rs7,800 actual payment +Rs2,400 LPG subsidy). If the consumer is in the highest tax bracket, then she will have to pay Rs3,060 towards the income tax, instead of Rs2,160 she is already paying. An additional burden of Rs900 because of the LPG subsidy.
 
It is preposterous to treat LPG subsidy as income, as it is contrary to reason. It is only a refund of the excess amount paid by the consumer to the gas dealer, which the oil company refunds to the beneficiary to comply with the government order to sell the LPG cylinder at the stipulated price to the users. It is therefore, impetuous for Finance Minister Arun Jaitley and the Modi government to take a view that this amount is taxable at the hands of beneficiaries.
 
So what is the way forward? If the Narendra Modi government is serious about providing subsidy, then there is a need to make exemptions, especially for subsidies provided as social benefits, like LPG subsidy. If there is no exemption provided, then honest taxpayers and a very large number of them will have to pay more tax.
 
 UPDATE:
The Finance Ministry, in a clarification, has said that the provision in the Finance Bill will not affect LPG subsidy and other welfare subsidies received by individuals.

"The Income Computation and Disclosure Standards (ICDS) notified by the Central Board of Direct Taxes (CBDT) is applicable to persons having income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" and following Mercantile System of Accounting. This is not applicable to individuals not having any income chargeable under the head "Profits and gains of business or profession" and receiving LPG subsidy or any other subsidy which is for the welfare of the individual. The Finance Bill, 2015 proposes to align the definition of Income with that provided in ICDS for this purpose. To restate the position, the provision in the Finance Bill, 2015, will not affect the LPG subsidy and other welfare subsidies received by individuals," the Finance Ministry said in a release.
 
 

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COMMENTS

Aditya Soni

2 years ago

Subsidies are financial help provided by government to their economically weak citizens. So How can government apply income tax on subsidies. On the other hand Mr. Modi introduces LPG subsidy surrender/give up scheme, this should be adopt by people who are financially strong.

give up subsidy here- http://www.getlpgsubsidy.in

R Varadarajan

2 years ago

Although the Oil price has fallen from US$106 to US$ 64, reduction of nearly 35% taking into exchange fluctuation, the reduction of Petrol and Diesel Prices are just about 11%. The difference of Rs.16/ & Rs12/ in the case of Petrol and Diesel would translate into a fortune if some one calculates the total difference on the total consumption of 25& 80 Million Ltrs respectively.Perhaps Moneylife could post the details of consumption and annual price difference not passed on to the consumers !!!

SuchindranathAiyerS

2 years ago

India's rulers are adept at stealing from Indians. Like the Constitution they say is mighty fine, it gives hundred rights and takes back ninety nine!

Bal krishna Gupta

2 years ago

The actual subsidy per cylinder is just Ra. 169.57. (I got one credited in my account today). So for those consuming 12 subsidised cylinders it amounts to Rs. 2034.38 per annum.
Out of 15 crore users, hardly 3 crore pay Income Tqax and almost 70% fall in 10% bracket. Their out go will therefore be hardly Rs.200 per annum.
It is not even certain whether this is taxable or not.
Even if it is taxable or not is it ok to make such a Hula Gulla about such a significant amount.
My family of four consumes just 6 cylinders a year. Those consuming 12 cylinders will have more than one earning members and can easily afford this Rs. 200-300 tax.

1. Due to direct transfer, the problem of ghost users and

2. Black marketing will reduce to a great extent.

3. Genuine users will get gas on time and

4. Waiting period would vanish.

5. Sale of gas to commercial users at higher prices would increase.

6. This will help gas companies to reduce their losses.

S K Gupta

2 years ago

Its a blatant preying on ignorant masses. Politician are happy making a free lavish living on public exchequer and bureaucrats have nothing to loose.

J Pinto

2 years ago

Government and bureaucracy are not known for their wisdom. Quite the contrary in fact.

Paras Savla

2 years ago

Press release issued by Finance Ministry states LPG and other welfare subsidy are not subject to income-tax http://pib.nic.in/newsite/PrintRelease.a...

Davidson D

2 years ago

According to me the burden would be on Rs. 2400 (200*12)@ 30.9% which works out to Rs.742 (Rs. 62 p.m.) additional tax burden. If the Govt. wants to tax subsidy,, then let them reduce entire value paid at the time of refill from total income so that consumers are in advantageous position.Every successive govt. seems to be worse than a pauper. This methodology of charging full price on refill and then crediting differential as subsidy in itself is a ridiculous way of handling subsidy. OMC have the no. of cylinders at subsidised rate, let them bill for 12 cylinders at subsidised rate and clear balance with full value. This would eliminate the round about method of crediting subsidies, tax implications can be eliminated, additional burden on banks of crediting subsidies to every account linked to Aadahar also gets eliminated. This would be a win win situation for consumers, banks, govt.

LALIT SHAH

2 years ago

All LPG cylinders holders pay attention
Is there actul subsidy on gas ?
All omc paying huge salery to its staff make everyone jillious. Also making heavy profit and paying aflatoon divided to government.
As far Gas subsidy is a great blunder run by this and previous government. And making public full.
Yday to news in navgujrat
1, Army has no fund to buy arms
2, We will do propaganda that our government has work in last 11 month says P.M.
And will spend any dam amount for TV PAPER AND INTERNET MIDEA
public knows that P.M. IS moving THIS TO THAT CONTRY ON WORLD TOUR. AND WEARING COSTLY CLOTHS SUITS BOOTS ETC.
PUBLIC WILL REPLY IN COMMING ELECTION.
SO ADVICE P.M. TO LET YOUR WORK SPEAK AND AAM PUBLIC KI DAL ROTI KI THALI PE BURI NAZAR NA DALE
MINISTERS AUR GOVERNMENT EXPANCE KO LAGAM DO

Ravindra Shetye

2 years ago

This is not the limit of their intelligence. They may come out with brighter ideas of Taxtortion for sure. Do they also tax the subsidy paid to the Oil Companies (with retrospective effect from 1956??
COMEDY CENTRAL realy. Kapil Sharma will blush at such comedies.

Men's rights activists demand reforms in family laws
Seeking reforms in family laws, a group of men's rights activists from across the country gathered at Jantar Mantar here and staged a sit-in on Tuesday.
 
The protesters later submitted a charter of demands to the Bhartiya Janata Party's national president Amit Shah.
 
"Our demand is basically against Section 498-A of the IPC (Indian Penal Code) and also against the move of the government to make the offence under it compoundable," rights activists Swarup Sarkar told IANS.
 
He said making the law compoundable will not serve any purpose.
 
Sarkar is the founder of the Delhi chapter of NGO Save Family Foundation, which organised the protest in association with Bangalore-based Child Rights Initiative for Shared Parenting (CRISP) that is fighting for shared parenting in case of divorce.
 
He said Section 498-A must be scrapped as it has been the most misused law in the country.
 
The Supreme Court in December last said false complaints under Section 498-A against innocent in-laws alleging cruelty and harassment were on the rise.
 
"For no fault, the in-laws, especially old parents of the husband, are taken to jail the moment a false complaint is filed against them by a woman under Section 498-A. By roping in in-laws without a reason and for settling a score with the husband, the false and exaggerated 498-A complaints are causing havoc to marriages," observed a bench of Chief Justice H.L. Dattu and Justice A.K. Sikri.
 
"While the Justice Malimath Committee (or Committee on Reforms of the Criminal Justice System) and the Committee on Petitions of Rajya Sabha have recommended that offence under Section 498-A be made bailable, the government seems to be working on making it compoundable," CRISP president Kumar V. Jahgirdar told IANS over phone from Bangalore.
 
Even now many men are getting arrested in matrimonial disputes on flimsy grounds.
 
"We are also demanding making of the Domestic Violence Act gender-neutral so that the harassed husbands could also file complaints against the abusive wives," he said.
 
The constitution, said Jahgirdar, guarantees equality in gender. "Surprisingly, no one believes that the men are also victims of domestic violence. Every year hundreds of married men are committing suicide due to family tensions."
 
He said the activists, after taking signatures against the biased law, submitted a memorandum to BJP president Shah in Delhi.
 
CRISP's activists, comprising families of the affected men, from its regional chapters in Chandigarh, Shimla, Delhi and Lucknow participated in the protest.
 
Social activist Santhoshkumar Potdar from Thelasangha village of Belgaum in Karnataka, who is fighting against misuse of law by women and reached the national capital by covering more than 2,500 km on foot from his hometown, demanded setting up a national commission for men and a separate ministry for the welfare of men.
 

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COMMENTS

Gaurav Satle

2 years ago

Laws ike IPC 498a, 376, Domestic Violence Act are gravely misused by women simply to extract more money out of husbands/boyfriends by the way of harrassment and blackmailing. Years of pending litigation, oppurtunists lawyers, rising corruption amongst govt officials and the mindset of the society that men are criminals by default and not see offences by women as crimes makes hell of lives of men. See that stats of suicides in men due to relationship disputes. Its on rise and increasing manifold every year.
Supreme Court of India and various committees have recognised these and have recommended the government to change or abolish such lopsided laws and make laws gender neutral. But its pleas have fell on deaf years as the government is more interested in votebank politics. Media rides on noises of women safety for business reasons. Innocent men have been alone in their struggle and remain isolated from the society. This is not a healthy symptom of a prospering nation.
Its time we bring in a positive change.

A Year in Power: BJP plans to counter opposition onslaught
Modi too is expected to visit his adopted village, Jayapur, in his Lok Sabha constituency of Varanasi in Uttar Pradesh, possibly on May 26
 
In a move to counter opposition parties' attack against the Modi government, the Bharatiya Janata Party is planning a major outreach programme involving its ministers and members of parliament.
 
According to party insiders, Prime Minister Narendra Modi has directed all his ministers and BJP parliamentarians to visit their Lok Sabha constituencies and adopted villages, soon after the budget session of parliament ends on May 8. The National Democratic Alliance government completes its first year in office on May 26.
 
BJP's South Delhi MP Ramesh Bidhri told IANS: "We have been asked to visit our constituencies after the budget session. Congress vice president Rahul Gandhi has been spreading misinformation against the government and we will aim to counter this."
 
He said each MP will go to his or her constituency and apprise the people of the pro-poor steps taken by the government. "A Jan Sampark Abhiyan - a campaign to contact people - will be carried out to inform the people as to how misleading Rahul Gandhi's propoganda has been," he said.
 
The ministers have also been asked to spend at least one day between May 12 and 30 in the village each has adopted under the government's Sansad Adarsh Gram Yojna (SAGY), a party official who did not want to be identified told IANS.
 
Modi too is expected to visit his adopted village, Jayapur, in his Lok Sabha constituency of Varanasi in Uttar Pradesh, possibly on May 26.
 
This would be his second visit to the village as prime minister, party sources said.
 
The decision to start this campaign has been taken following the opposition's attack on the government, and its bid to paint the government as anti-poor and pro-corporate, the source said.
 
Rahul Gandhi, who has struck an aggressive stance after returning from a two-month long sabbatical, has apparently been able to make a dent in the image of the Modi government, calling it a "suit-boot sarkar", feel some party insiders.
 
During the stay in their constituencies or adopted villages, BJP MPs and ministers have been asked to talk about all the programmes that have been launched by the Modi government to help the poor.
 
Added to this will be the three social security schemes that Modi is scheduled to launch on May 9 in Kolkata. These include Pradhan Mantri Suraksha Bima Yojna, Pradhan Mantri Jeevan Jyoti Bima Yojna and Atal Pension Yojna.
 

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COMMENTS

B. Yerram Raju

2 years ago

A man in hurry is bound to falter. Why do i say this? The target setting for any scheme - e.g., PMJDY where over 10mn accounts are opened or the Bima Yojana schemes proposed to be launched again with the assistance of bank schemes where Bankassurance failed - typically end up with large numbers of accounts riddled with inefficient execution and lack of supervision. If something can be achieved in a jiffy why did financial inclusion not succeed for the last 9 years? Specific well articulated, well implemented and well monitored strategies are the need of the hour. Publicity oriented goals proved earlier a disaster for carrying social benefits to the intended and would continue to be so in future.

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