MARCH 17, 2002
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The Online Best Employers Package
Didn't get enough in print of the BT-Hewitt Best Employers in India survey? No problem. We've put together an exclusive online package that takes you deep inside the top 10 companies. The reports look at everything—people practices, compensation strategies, leadership styles-that makes these companies great places to work in.

Stanley Fischer Unplugged
He has the rare distinction of having advised through the half-a-dozen economic crises of the 90s. But now economist Stanley Fischer is calling it quits at the International Monetary Fund, and joining Citicorp as Vice Chairman. In India recently, Fischer spoke on IMF, India, and the global recession.
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Going By The Book
Employees retiring as per Voluntary Retirement Scheme (VRS) can claim tax deduction on the entire amount of VRS compensation paid by the company if this amount does not exceed Rs 5 lakh.

We are an Indian company designated by the Central Government as an infrastructure facility. What tax benefits will our US investors be eligible for?

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Your US investors should classify as an ''infrastructure capital company'' under Section 10 (23G) of the Income Tax Act, 1961 (ITA), which includes a company that has made investments by acquiring shares or providing long-term finance to an enterprise wholly engaged in the business of developing, maintaining, and operating an infrastructure facility. Your US investors can avail of tax benefits under Section 10 (23G) of the ITA, whereunder its net income (by way of dividend, interest or long-term capital gains) will be exempt from tax after taking into account all expenses incurred to earn the same. Such dividends, interest or long-term capital gains income would be exempt in the hands of an infrastructure capital company only for those assessment years during which the infrastructure facility has been approved under Section 10 (23G). The effect of these provisions, therefore, are that income tax benefits would only be available to your US Investors on its net income in a year in which your company has been approved as an infrastructure facility.

I am working with a public sector unit for the past seven years on contract basis, which is renewed yearly. I enjoy cordial relations with my employer, but in case they do not renew my contract, what recourse do I have?

The course of action open to you will depend on your category of employment. If you belong to the management or administrative cadre (that is, non-workman) employee, the terms of your employment will be governed by your contract of employment. Once your services are terminated in accordance with the terms of your contract of employment, you may not be forced back upon your employer by any legal action nor may you succeed in any suit unless the procedure for your termination was not in accordance with your contract of employment. However, if you classify as a workman under the Industrial Disputes Act, 1947, (that is, if you are employed to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work and in such supervisory capacity you do not draw wages more than Rs 1,600 per month or exercise functions mainly of a managerial nature), you can seek relief from the Labour Court for unfair or wrongful dismissal.

Can the employees of our company who are opting for Voluntary Retirement Scheme (VRS) claim tax deduction on the VRS compensation paid to them?

Your employees can claim tax deduction on the entire amount of VRS compensation paid by your company if this amount does not exceed Rs 5 lakh. Any amount in excess of Rs 5 lakh will be subject to income tax. However, to qualify for this exemption, your company has to fulfil conditions including (i) the VRS should apply to all employee(s) who have completed 10 years of service or 40 years of age, including workers and executives except directors; (ii) the VRS should result in overall reduction in the existing strength of the employees; (iii) the vacancy pursuant to the VRS should not to be filled up nor the retiring employee be employed in another company or concern belonging to the same management; (iv) in case of companies/co-operatives societies, the VRS should have been approved by the Chief Commissioner/Director General of Income Tax; (v) the VRS compensation should not exceed three months salary for each completed year of service or salary at the time of retirement multiplied by the remaining months of service before the date of retirement subject to a maximum amount of Rs 5 lakh for each employee.


The views expressed here should not be construed as legal opinion and is for reference only. Business Today and/or the author will not be responsible for any decision taken by readers on the basis of these views. Please send in your queries to Legal.bt@intoday.com or Going By the Book, c/o Business Today, F-26, Connaught Place, New Delhi-110001.

 

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