Issue raised By Media after passing the Finance Bill ,whether subsidy on LPG is taxable under Income Tax act ?
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 assessee [other than one considered under Explanation 10 to Section 43(1)] would be included in assessee's income."
Thus, any subsidy which is not reduced from the actual cost of the asset in view of provisions of Explanation 10 to Section 43(1) shall be taxable as revenue receipts of the assessee.
Now Come to subsidy of LPG cylinder ,it is also a cash subsidy granted by the Central Government , so covered under above definition ,hence treated as revenue receipt and taxable in hands of the assessee.
Clarification from Ministry of Advance
Ministry of Finance has release a press note and clarified the issue that Subsidy From LPG cylinder is not taxable.
Provision in the Finance Bill, 2015, will not Affect the LPG Subsidy and Other Welfare Subsidies Received by Individuals
Certain doubts have been raised in a section of the media about the applicability of the official amendment moved in the Finance Bill, 2015 in the Lok Sabha on 30th April, 2015 with respect to definition of ‘income’.
Sub-section (2) of section 145 provides that the Central Government may notify Income Computation and Disclosure Standards (ICDS) for any class of assessees or for any class of income. The Central Board of Direct Taxes (‘CBDT’) notified ICDS on 31.3.2015 vide Notification number S.O. 892 (E) after wide consultations with the stakeholders for which the draft was placed in the public domain. The ICDS 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.
Whether the issue is "Closed" or Still "OPEN "?
Read following points and then decide and comment in comment section'
- The Govt has issued a press note ,no amendment has been made in Income Tax Act to exclude, LPG subsidy and welfare schemes.
- In clarification (read red text in clarification above) ,Govt has clarified that new amendment is not applicable to individuals not having any income chargeable under the head “Profits and gains of business or profession ,so indirectly it means new amendment is still applicable on Individuals having income from business and profession and getting LPG or other subsidy.
What we want to raise here that if Govt intentions are to exempt the LPG subsidy and other welfare subsidies then Instead of issuing a clarification which requires further clarification ! They should come with a clear cut clarification that LPG Subsidy is not taxable and should insert a Exemption in Income Tax act or clarification under new sub clause (above) must be added ,