LPG Subsidy to be taxed?
IN the official amendment to the Finance Bill 2015 as passed by the Lok Sabha, a new clause is added to Section 2 (24) (which gives an inclusive definition of income) of the Income Tax Act. There are 17 sub-clauses for this clause and 18th one is now added which reads as:
Income includes,
"(xviii) 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 the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43;"
This was supposed to have been done to clarify that subsidies are not capital receipts, but it may have a totally unexpected result that the subsidy given to LPG cylinders may now become taxable. LPG users now get a subsidy of over Rs. 400 per cylinder for 12 cylinders a year. Prime Minister Modi has requested those who can afford to, not to take the subsidy - well if you still take the subsidy, pay tax on that - maybe about one third of the subsidy will go back to the Government as tax.