Taxpayers who availed of concessional accommodation from their employers will have to file fresh tax returns for 2005-06 to seek a refund of additional taxes that they have paid during the year.
Thats on account of an amendment that was introduced by the government at the time of the passage of the Finance Bill. The value of concessional accomodation as perquisite for tax purposes was reduced from 20% of salary to 15% in cities that has a population of over 2.5 million.
For cities with population between one million and 2.5 million, the perk value has been halved to 10%, while for cities with population between 400,000 and 1 million it has been slashed from 20% to 7.5%. And, for the rest it has again halved to 7.5%.
There is another rider: the benefit is only available if the accomodation provided by the employer has been made available at concessional rates for which only a token amount is charged. It does not benefit those who live in rent-free accomodation.
Besides, you can only claim a refund (by filing a fresh return) if you filed a the original tax return for 2005-06 within the stipulated time which was July 31 2006.
This is a substantial concession extended by government. Suppose an employee residing in a metro or a category A city gets a salary of Rs 10 lakh per annum. The value of his concessional accommodation for tax purposes has been reduced from Rs 2 lakh to Rs 1.50 lakh. If he pays concessional annual rent of Rs 25,000, the net value of the perquisite has come down from Rs 1.75 lakh to Rs 1.25 lakh. Hence, he will save a tax of about Rs 16,800.
In smaller towns like Bokaro and Bhilai, the benefit to the tax payer is even more substantial as the value of perquisite has been revised downwards from 20% to 10% of the salary.
The concessions have been granted with retrospective effect from 2005-06. But, most of the taxpayers have already paid the taxes and filed the return for 2005-06.
But, to get the refund of the previous year, tax partner of Ernst and Young Amitabh Singh said that the taxpayer will have to file a revised tax return. But, a taxpayer can file revised tax return only if he had filed the original return during the stipulated time, that is between April 1 and July 31,2006.
Otherwise, he will have to forego the extra tax that he had deposited for 2005-06 on the perquisite of concessional accommodation, unless the department issue fresh guidelines.
Singh said that to eliminate this discrepancy the government should issue a direction to the tax authorites to unilaterally re-calculate the perquisite value of concessional accommodation and refund the excess taxes, if any, to the employee affected by the amendment to the bill. India does not have provision to carry forward any excess taxes paid.
However, for 2006-07, taxpayers can claim the refund by filing the return before July 31, 2007.
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