PSU BANK EMPLOYEES ARE GOVT EMPLOYEES FOR INCOME TAX PURPOSE? - Professionals - Taxation - TIK Share
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PSU BANK EMPLOYEES ARE GOVT EMPLOYEES FOR INCOME TAX PURPOSE?


Kamaldeep Singh

2014-03-12

Hi, I am a bit confused while filing ITR of a person who has retired from Punjab and Sind bank in FY 12-13. For calculation of Income tax on gratuity, Commuted pension do we have to consider him a GOVT. EMPLOYEE or not as this consideration creates huge distinction in taxability.


Kindly help.

CA Pulkit Sharma

2014-03-12

Govt. employees are those persons who are employed under the Govt. (Central/State), receiving salaries which are debited to the Consolidated Fund of the Govt. Salaries of most of the PSU employees are debited to the fund other than the consolidated fund of the Govt.

Even if we read the income tax act, explanation to the section 10 (10) related to Gratuity reads that Employees of Statutory Corporation are not covered by it.

The employees of banks of public sector banks do not receive salary directly from government funds, hence can not be classified as government employees.

People receiving money directly from government funds can be said as government employees. Ex: CBDT employees, Municipal corporations etc.

The employees of PSU's receive salary from the independent units. Salary is not credited from the government funds directly.

I have answered based on my limited knowledge on the subject but as per income tax act, these employees are not government employees.

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Rahul Rai

2014-03-12

A nice summary by pulkit. I read on this topic somewhere, and putting the text here for your references.

Govt. employees are those persons who are employed under the Govt. (Central/State), receiving salaries which are debited to the Consolidated Fund of the Govt. Salaries of most of the PSU employees are debited to the fund other than the consolidated fund of the Govt.
(2)All the PSU employees are not Govt. employees as PSUs are not always fully under the control of govt. These are mostly autonomous bodies formed by some Acts of the Govt. for commercial & industrial activities. Employment in PSUs is called foreign service. PSU employees receive pay with govt. sanction from the fund other than the consolidated fund of the Govt. Teachers in aided/sponsored schools are paid from grants-in-aid of revenues of the state govt.
(3)Govt. organizations are fully owned, managed & controlled by the Ministry of the Govt. and involved in developmental works not connected with commercial activities in the interest of common people. 
PSUs are mostly autonomous bodies owned (wholly or partly), controlled & managed by the Govt./Local Authorities, having objective to serve the public through commercial activities.
(4)Pvt. Companies are owned by individuals, managed by the owners & professional managers and involved in commercial & industrial activities, being funded by their own sources, loans, other private sources and, operate in all areas with adequate return on investment, with main aim to make money (maximum profit), do not have accountability to the public. 
PSUs are owned (wholly or partly), managed and controlled by the Govt./Local Authorities, get capital mainly from the Govt. and sometimes from the public issues, have public accountability, operate in basic and public utility sectors with main objective to maximize social welfare and ensure balanced economic development. Profit making is the secondary objective. 
(5)Indian Rly, Dept. of Posts, BSNL, SAIL, Nationalised Banks like SBI, UBI etc, State Transport Corpns., Air India etc -these are all PSUs providing essential & utility services to the public at cheaper rate.

Three types of PSUs:
(a)Departmental Undertakings: Function under overall control of a Ministry of the Govt., receive fund from the Govt. like Govt. Deptts., provide ESSENTIAL SERVICES for the public. Maximum Govt. interference. Example: Rly, Dept. of Posts, BSNL, DD, AIR, Ordnance Factory etc. 
Indian Railways is a part of the Central Government, though its management has been delegated to the Railway Board by the President of India.

(b)Statutory Corporations (Public Corpn.): Autonomous bodies created by the spl. Act of the Parliament/ State Legislature which define their power, function & management. Owned by the Govt. but, free from Govt. control in respect of internal management. Received capital wholly from the Govt.; supposed to be self-sufficient but may take loan/ assistance from Govt., if necessary. They are controlled by the Board of Directors, Board members are Govt. nominees. They are independent of Govt. interference and have flexibility in operation and taking of decision, provide UTILITY SERVICES. Example: LICI, FCI, UTI, State Transport Corpns., SBI, State Electricity Boards, ONGC Etc.
(c) Govt. Companies: ORIGINAL BUSINESS UNITS OF THE GOVT., registered under Company Act and fully governed by that Act, Managed by the Board of Directors where whole or majority of the directors are appointed by the Govt., depending on private participation. Capital is provided wholly or partially by the Govt. In case of partial funding, Govt. hold 51% or more of its capital for business while the rest coming from private investors. Operate in some specific fields in contrast to the Pvt. Cos. Employees are not civil servants. Example: SAIL, GAIL, HMT etc.

(6) Income Tax Deptt., Customs & Excise dept., Sales Tax dept. etc. are all govt. departments operating for revenue earning under full control of the Ministry. They are not at all meant for commercial or business activities of the Govt. Whatever amount is collected by them as revenues flows to the Govt. fund.

For more details refer

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Kamaldeep Singh

2014-03-12

Thankyou guys and yes a prompt reply indeed.

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