Budget 2011 exempts perquisites of UPSC Chairman and Members like Election Commissioner and SC Judges

NEW DELHI, MAR 03, 2011: ONE of the prominent gainers of the proposed amendments on the Direct Tax side are the UPSC Members. The existing provisions of the Income-tax Act provide for the taxation of any perquisites or allowances received by an employee under the head "Salaries" unless it is specifically exempt under the Act.

Currently, specified perquisites of the Chief Election Commissioner or Election Commissioner and the judges of the Supreme Court are exempt from taxation consequent to the enabling provisions in the respective Acts governing their service conditions. It is proposed to amend section 10 to extend similar benefit of exemption in respect of specific perquisites and allowances, which will be notified by the Central Government, received by both serving as well as retired Chairmen and Members of the Union Public Service Commission.

This amendment is proposed to take effect retrospectively from 1st April, 2008 and will accordingly apply in relation to the assessment year 2008-09 and subsequent years.

Infrastructure Debt Fund

In order to augment long-term, low cost funds from abroad for the infrastructure sector, the FM has proposed to set up of dedicated debt funds.

Section 10 of the Income-tax Act excludes certain incomes from the ambit of total income. It is proposed to amend section 10 of the Income-tax Act so as to provide enabling power to the Central Government to notify any infrastructure debt fund which is set up in accordance with the prescribed guidelines. Once notified, the income of such debt fund would be exempt from tax. It will, however, be required to file a return of income.

It is also proposed to amend section 115A of the Income-tax Act to provide that any interest received by a non-resident from such notified infrastructure debt fund shall be taxable at the rate of five per cent. on the gross amount of such interest income. It is further proposed to insert a new section 194LB to provide that tax shall be deducted at the rate of five per cent. by such notified infrastructure debt fund on any interest paid by it to a non-resident.

These amendments are proposed to take effect from 1st June 2011.

Rationalisation of Tax on Income distributed to unit holders

Under the existing provisions contained in section 115R(2) of the Income-tax Act, a Mutual Fund is liable to pay additional income-tax on the amount of income distributed to its unit holders.

It is proposed to levy additional income-tax at a higher rate of 30 per cent. on income distributed by debt funds to a person other than an individual or HUF.

It is therefore proposed to amend section 115R(2) to provide that the Mutual Fund shall be liable to pay additional income-tax on such distributed income at the rate of –

(a) 25 per cent. if the recipient is an individual or HUF in case of distribution by a money market mutual fund or a liquid fund;

(b) 30 per cent. if the recipient is any other person in case of distribution by a money market mutual fund or a liquid fund;

(c) 12.5 per cent. if the recipient is an individual or HUF in case of distribution by a debt fund other than a money market mutual fund or a liquid fund; and

(d) 30 per cent. if the recipient is any other person in case of distribution by debt fund other than a money market mutual fund or a liquid fund.

There will be no change in the rate of income-tax in case of distribution to any individual or HUF. Distribution of income by an equity-oriented fund shall continue to be exempt from tax.

This amendment is proposed to take effect from 1st June, 2011.