Tsivasankaran
Consultant
Dks.ica
Accounts & Audit
Danprsd
Hr Generalist / Payroll
A.S.Sharma
Service
Vinaywadikar
Proprietor

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Hi!
Is there any provision under the current Income Tax laws that allows the company/Employer to pay the income tax on behalf of the Employee; who is also an Indian.
In short can an employee negotiate a salary package which quotes a net amount and ask his income tax laibilities to be taken care of by the company.
Also if this is possible the can i know under which clause or section is this possible in such .. also in such a case .. does the employee have to pay fringe benefit tax; considering the company taking care of his income tax liability becomes a fringe benefit for the employee..
Kindly Enlighten!!

Dear Gentleman
It is very simple
I negotiate my salary with my new employer for net
I tell them i need to get say 50000 rupees in habd after deduction for pf and tax
The organisation then work out a pacakage and give it to him
Company does not pay his income tax
The package is worked out in suach a manner that the employee gets his net alrigvht.
having said this, this can be applicable for the first year only, Then his increases, his crossing the slabs, Govt increasing the rates can not be compensated
That is why the companies after working out put a clause that employee is liable to pay tax a sapplicable
Siva

Thank you for the reply!
Actually confusion has set in after a supreme court judegment which says - "Tax paid by employer for staff is a non-monetary perquiste" ..
Also was a report on this -
http://www.financialexpress.com/news...uisite/259777/
After this news .. there is certain confusion.. so want to know if company can actually pay tax on behalf of employee and if so under what conditions/ sections of IT Act.
Thanks for all your help and assistance!

There is no prblem in paying the I. Tax by the employer except that it shall be added to the Income of the employee concerned. Anand
Dear
Employer Can deduct the income tax from employees and same can be remitted to the Govt. But company can't pay tax on behalf of any individual. It is not allowed as per the Companies Act.
Income tax should paid by the person, how get the INCOME.
Regards
Mahesh D.S.

Dear All!!
Thanks so much for the help!! But see the confusion still remains .. there are a few who believe that the company can pay tax on behalf of the employee ... while there are other who think it goes against the companies act.
Any more views .. on this issue.
Keep finding myself in the midst of the controversy.. havent yet managed to get a very clear picture on this.
All views will be appreciated .. thanks for all the help in advance!!
Regards
Dan....

Friends,

There is no restriction in Income Tax Act, as well as in the Companies Act, 1956, regarding the payment of Income Tax of Employee.

Now the question of allowability -



1. In the hands of Company - As per Companies Act,1956



- the company can get deduction on account of Salary + Income Tax, because the income tax of the employee paid by the company is forming part of the salary i.e. compensation.



2. In the hands of Company - As per Income Tax Act,1961

- Yes the expenditure Salary+ Tax is a deductible expenditure as Per Income Tax Act in the hands of Company.



3.Taxability for Recipient -



For the Recipient the total salary will be Salary + Tax paid by the company on behalf of the employee.



For Example if your salary is 5 lacs & Income Tax paid by the company on behalf of you is 1.25 Lacs, in that case your total income is-

5+1.25=6.25 Lacs.

also the company can get the deduction for the same under the head salary.



as you asked for the reference of Section -



If the employer pays without a contract the tax paid by him would form part of perquisites within the meaning of section 17(2)(iv) and will taxable under this head.

However as per section 10(10CC) tax on non monetary perquisites paid by employee shall be exempted.



Having regard to section 200 of the companies act, 1956, an Indian company can not pay any salary which is tax free or which is varies with the tax payable by the employee.



However tax paid by the company in contravention of section 200 of the companies act would nevertheless be part of salary.



Rgds,

Deepak Singh

Thank you so much .. this really is an informative post. Thank you for all the references of the Section as well as clauses. Thanks Again! regards Dan
Hi All!
Just wanted to know if in the case of Trusts or Organizations managed by Trusts .. which do not fall under the companies act 1956 .. can the employer still pay tax on the employers income..
Pls Clarify ..
Any help on the same will be highly appreciated.
Regards
Dan

https://www.pwc.in/services/tax/news_alert/2012/pdf/pwc_news_alert_14_august_2012_sedco_forex_international_driling_inc.pdf

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