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Co. paying tax for employees

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virendra

self employed

25 Points Posted on 09 May 2010

Respected All

As per income tax law co. cnt pay tax on behalf of there employees, employees them self hv to bear the tax burden, but i hv come across a co. wh pays tax for der foreign client.
M nt I.T expert, I will try to explain suppose his pay is rs 2 lakh per mnth n tax cums at 4 lakh annually so co. decided to pay him 24(salary)+4(tax)= 26 lakhs so the foreign client (engineer) dnt hv to bear d tax, the work is in s.africa but d foreign client will b on indian co. payroll
So ALL, my learned experts frnds i wnt to kn is it right practice or not if wrong cn ni1 gv my relevant ACT or any Court Case i will b v thn full to all

with rgrds
guddu

Replies (1)

Amir

Learner

4016 Points Posted on 10 May 2010

Dear Virendra,

Shifting the burden of tax is perfectly valid.

In case of employees -

If co. bears the tax burden on non-monetary perks (like Rent free accomodation) then "the amount of tax is not allowed as deduction to the employer" & that tax remains exempt in the hand of employees.

Whereas if co. bears the tax burden on monetary perks " then the "amount of tax" becomes a taxable perquisite in the hands of employees & it is allwoed as deduction to the employer.

In case other than employees -

The amount of expenditure increases with the aqmount of tax & is allowed as deduction..(also known as grossin up)