Tag: #salary

-Report by Shweta Sabuji

The recent case of PANCHAM LAL PANDEY versus NEERAJ KUMAR MISHRA & ORS., talks about the Uttar Pradesh High Schools and Intermediate Colleges (Payment of Salaries of Teachers and other Employees) Act, 1971 and how section 9, read along with section 10 of the act comes into being.

FACTS: 

Tripathi Ramroop Sanskrit Vidyalaya, located in Jogapur, Kaushambi, Uttar Pradesh, is an established school that provides Sanskrit education from Class I to XII, or what is also known as Uttar Madhyama. The school was granted permanent recognition on February 22, 1999. The Government of Uttar Pradesh has decided to include Sanskrit Vidyalayas and Mahavidyalayas on its Grant-in-Aid List, and has laid out specific criteria for institutions to be included in this list in a G.O. dated February 7, 2014. The State Government has notified a list of institutions that have been included in the Grant-in-Aid List, including Tripathi Ramroop Sanskrit Vidyalaya which is listed as Serial No.47. In relation to the aforementioned institution, the State Government approved five positions for salary payment from the State Exchequer, one for the Headmaster and four for the

Assistant professors. In a circular dated 01.01.2016, the Principal Secretary of the Government of Uttar Pradesh approved the payment of salaries to all instructors at institutions receiving Grant-in-Aid who were actively employed previous to the institution’s inclusion on the Grant-in-Aid list. A different circular, dated 18.03.2016, outlined how the reserve policy should be applied. One of the professors, Satya Prakash Shukla, filed Writ Petition No. 29784 of 2016 before the Lucknow bench of the Allahabad High Court since the aforementioned Circulars were having an impact on some of the teachers.

On the grounds that the Joint Secretary of the Department of Secondary Education had stated that “the payment of salary to the teachers shall be made on the basis of seniority of teachers as disclosed in the Manager’s Return,” the aforementioned Writ Petition was granted by order dated December 21, 2016. Unfortunately, by order dated March 28, 2017, the Director of Secondary Education divided the positions of Assistant Teachers, disregarding the Joint Secretary’s testimony before the High Court, and ordered that Neeraj Kumar Mishra, who was nearly five years younger than Pancham Lal Pandey, be paid a salary. In light of this, the aforementioned Pancham Lal Pandey chose

As a result, the aforementioned Pancham Lal Pandey filed Writ Petition No. 19709 of 2017 to contest the Director of Secondary Education’s order from March 28, 2017. Following a hearing with the parties, the aforementioned writ petition was granted by decision and order dated 15.04.2019, nullifying the order dated 28.03.2017 and directing the authorities to declare Pancham Lal Pandey entitled to payment of salary from the State Exchequer.

PLAINTIFF’S CONTENTION: 

The argument made by the knowledgeable attorney representing the appellant in this case, Pancham Lal Pandey, in challenging the aforementioned order is that the Review Application was not maintainable because Neeraj Kumar Mishra’s Special Appeal was dismissed with no apparent error on the face of the record, and that the review was approved without taking his objections to the maintainability of the application into account.

DEFENDANT’S CONTENTION: 

On the other side, Mr. V.K. Shukla, learned Senior Counsel defended the order on the grounds that the learned Single Judge had made a clear legal error in granting the writ petition and that if the order is left in place, it will continue criminal activity, which is against the law. In light of Section 9 read with Section 10 of the Uttar Pradesh High Schools and Intermediate Colleges (Payment of Salaries of Teachers and other Employees) Act, 1971, the institution is not permitted to create any new post of a teacher or any employee without the prior approval of the Director, so the review petition was properly allowed because there was an apparent error in the order of the Division Bench dismissing the Special Appeal.

JUDGEMENT: 

The Joint Secretary of the Department of Secondary Education stated that teachers’ salaries would be paid based on seniority, therefore the question of teaching was irrelevant. In light of this declaration, the Single Judge granted the writ petition. The institution’s decision to divide the authorized Assistant Teacher positions into subject-based groups is purely an internal decision that imposes no additional burden on the State. Since the school was placed on the Grant-in-Aid list with a Headmaster and four Assistant Teachers in order of seniority, allowing just five people to earn compensation from government funds is legal. The Court did not establish a new position for an assistant teacher at the institution. Because of this, the Writ Court correctly granted the writ petition, and the Division Bench did nothing wrong by rejecting the Special Appeal. We believe that, given the facts and circumstances of the case, the contested ruling, dated February 5, 2021, enabling the review, is illegal and must be reversed.

READ FULL JUDGEMENT: https://bit.ly/3jZEE97

INTRODUCTION

Since before the arrival of the first colonists, income taxes have been a common idea. It is regarded as a tax that a citizen pays to the state, based on their income and the profits of their businesses. The state uses the money it receives from taxes for a variety of things, such as providing public services, building infrastructure, paying for the military and other forms of defense, and providing subsidies. The Income Tax Act of 1961 is a sophisticated and extensive statute that covers all of the different laws and rules that govern how the country administers its tax system. Income tax is levied, handled by, collected from, and collected by the Indian government. According to Section 4 of the Indian Income Tax Act, income tax will be assessed for the corresponding assessment year based on each person’s total previous-year income at the rates set out by the Finance Act. As the name suggests, tax deducted at source (TDS) aims to collect money right from the source of income. It combines the ideas of “pay as you earn” and “collect as it is being earned,” and is essentially an indirect method of “collecting tax.” It is important to the government because it gets ready for tax collection, guarantees a steady stream of income, and gives taxes a wider base and greater reach.

In addition, it offers the taxpayer a straightforward and practical method of payment while also distributing the tax’s incidence. The person receiving the income is typically responsible for paying income tax. However, the government makes sure that income tax is taken out of your payments in advance using provisions known as ‘Tax Deducted at Source.’ The net sum is given to the income recipient (after reducing TDS). The recipient will include the gross amount in his income and subtract the TDS amount from his overall tax obligation. The sum already withheld and paid on the recipient’s behalf is accepted as payment in full. The mentioned provisions are used to fulfill the recipient’s tax obligations. As a taxpayer, it is our responsibility to declare the amount of income we have earned and paid taxes on in our income tax return.

According to Section 192 of the Income Tax Act of 1961, anyone responsible for paying any income that is chargeable under the head ‘salary’ must deduct income tax from the assessee’s anticipated income under the head salary. The tax must be computed at the average income tax rate based on the rates currently in effect. The deduction must be made at the time of the actual payment. However, unless the estimated salary income exceeds the maximum amount exempt from the tax that applies to an individual during the relevant financial year, no tax is required to be withheld at the source. Once the tax has been deducted, it must be deposited in a government account, and the employee must be given a certificate of tax deducted at the source (also known as Form No. 16). The employee must include this certificate with his income tax return to receive the TDS credit on their income tax assessment.

Lastly, the employer/deductor must complete Form No. 24Q, Quarterly Statements, and submit it to the Income-tax Department. Salary is said to be the remuneration received by or accruing to an individual for service rendered as a result of an express or implied contract. The statute gives an inclusive but not exhaustive definition of salary. As per Sec. 17(1), salary includes therein-

• Wages
• Annuity or pension
• Gratuity
• fees, commission, perquisites, or profits in lieu of salary
• Advance salary
• Receipt from provident fund
• Contribution of the employer to a recognized provident fund in excess of the prescribed limit
• Leave encashment
• compensation as a result of variation of service contract etc.
• Government contribution to a pension scheme.

The law mandates that tax be withheld at source from earnings covered by the head salary. As a result, the existence of an employer-employee relationship is a requirement before a specific receipt can be taxed as a head salary. When an employee is subject to the employer’s right to direct how he carries out instructions in addition to working under his direct control and supervision, this type of relationship is said to exist. Therefore, the law essentially mandates the deduction of tax in the following situations: (a) When the employer pays the employee. The income under the head salaries is above the maximum amount not subject to tax, (b) the payment is in the nature of a salary, and (c) the payment has been made. Both payment and deduction of tax are in the hands of the employer.

Even if an individual or HUF is not subject to a tax audit, payments made by them that total more than Rs 50,000 per month must be TDS-deducted at a rate of 5%. Furthermore, individuals and HUF required to deduct TDS at 5% are exempt from applying for TAN. Your employer deducts TDS at the corresponding income tax slab rates. Banks deduct TDS at a rate of 10%. If they don’t have your PAN information, they may also deduct 20%. The income tax Act specifies the TDS rates for the majority of payments, and the payer deducts TDS based on these rates. If your total taxable income is less than the taxable limit and you provide your employer with investment proof (to claim deductions), you are not required to pay any tax. There should be no TDS deducted from your income as a result.

TDS on payment of pension– It has been clarified by CBDT vide circular No. 761 dt. 13/01/98 that in the case of pensioners receiving pension through nationalized banks, provisions of TDS are applicable in the same manner as they apply to the salary income.

TDS on Retirement Benefits: According to section 17, retirement benefits that an employee receives are taxable under the heading salaries as ‘profits in lieu of salaries’. As a result, they are subject to the TDS provisions outlined in Section 192 and other pertinent sections. As a result, when an employee retires, the employer must compute the TDS while taking these factors into account. However, some of these retirement benefits are either fully or partially exempt from taxation under Section 10.

COMPARISON OF GOVERNMENT EMPLOYEES AND PRIVATE SECTOR EMPLOYEES

Rent-Free Accommodation (Unfurnished): It is a benefit that the employee receives from their employer. A prerequisite is simply a non-financial or in-kind benefit provided to an employee. According to the Act’s provisions, these are taxable in the employee’s hands.

• Government Employees: The taxable value of the benefit shall be the License Fees as determined by the Government for the allotment of houses. The License fee is quite nominal.
• Other Employees: House is owned by the Employer. The following shall be the taxable value of the perquisite-
  • If the Population exceeds 25 Lakhs, then 15% of salary.
  • If the Population ranges between 10-25 Lakhs, then 10% of salary.
  • In any other case, 7.5% of salary.

House is taken on lease or rent by the employer: The taxable value of perquisite shall be irrespective of the population. it shall be Actual Rent & 15% of salary whichever is lower.

• Gratuity:
  • Government Employees: The amount of Gratuity received is fully exempt from tax.
  • Other Employees: The Exemption shall be a minimum of the three:
    1. Actual Gratuity Received.
    2. Rs. 1,00,000(Likely to increased to Rs. 20,00,000).
    3. 15/26*Last drawn salary* Completed year of service or part thereof.
• Pension:
  • Government Employees: Fully Exempt.
  • Other Employees:
    1. Non- Government Employees in receipt of Gratuity: Only 1/3rd of the full value of the commuted pension is exempt from tax. So, technically you are required to pay tax on 2/3rd of the value of the commuted pension.
    2. Non-Government Employees not in receipt of Gratuity: Only 1/2nd of the full value of the commuted pension is exempt from tax. Here, you are required to pay tax on half of the value of the commuted pension.

Basis of Difference	Government Employees	Non-government Employees
Entertainment Allowance	Lower of below is allowed as a deduction: 1/5th of salary, or, Rs. 5000	Fully-taxable. No deduction is allowed
Rent-free Accommodation (Unfurnished)	The nominal License fee shall be taxable value.	Certain Percentages of salary shall be taxable value.
Foreign allowances or perquisites	Exempt	Not Exempt

CONCLUSION

The numerous tax benefits enjoyed by the government employee could be one of the reasons which give them an edge over the non-government employee. Tax deducted at Source (TDS), as the name implies, aims to collect money directly from the source of income. It is essentially an indirect way of “collecting tax,” combining the concepts of “pay as you earn” and “collect as it is being earned.” It is crucial to the government because it prepares for tax collection, ensures a consistent income stream, and expands the base and scope of taxes. It also distributes the tax’s incidence while providing the taxpayer with a simple and useful method of payment. Taxes on income are typically paid by the individual receiving the income. However, using a feature known as “Tax Deducted,” the government ensures that income tax is deducted from your payments in advance.

This article is written by Sanskar Garg, a last-year student at the School of Law, Devi Ahilya University, Indore.

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