Income Tax: Can I Choose and Declare the New Regime to the Employer?

Update (Apr 13, 2020): Govt of India has clarified that the employee can ask deductor (employer) to consider new tax regime for taxation (provided certain conditions of no-business income, etc. are met). The notification below is just in. Thanks to Ankit Lohiya for updating me about the notification.

Hence, the article below stands void.

In the 2020-21 budget by the Govt of India, a new tax regime was announced. The below table depicts the difference between the old regime and the new regime. HOWEVER, Govt has announced that it will give an option for the citizens to choose which tax regime they would like to be taxed on.

New Income Tax Regime

Source: https://timesofindia.indiatimes.com/

Does that mean I can tell my employer to tax me on which regime?

As it looks, your employer cannot take such an option from you to choose which income tax regime they should tax you on.

So, what will the employer do?

The employer will still need to, as of today, continue deducting income taxes per the old regime (like how they used to do during FY 2019-20). They cannot ask, or take a choice from, the employee on which regime to tax on, nor they can tax them other than on the old tax regime.

When can I then choose my tax regime?

The employee can choose the tax regime at the time of his/her Income Tax returns. The IT department will recalculate the income tax and ask you to pay/refund an additional amount.

Why is it that so? Why can’t employers take option from employees?

As per the Finance Act, 2020 which is enacted by the Parliament, taxes are to be withheld and paid to the Government as per Part I of First Schedule of the Act (please see screenshots below).

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No alt text provided for this image

The Government has, in fact, introduced the new tax regime not by altering the Part I of First Schedule above, but instead by introducing the new regime as a new section (Section 115BAC). As long as Part I of First Schedule is changed/amended with the rates mentioned in 115BAC, the employer needs to follow the old regime for TDS.

Can I change choose old regime in the years to come, if I choose the new regime during FY 2020-21 (AY 2021-22) during income tax returns?

No, 115BAC mandates that in case of individuals and HUFs who have income either from a business or a profession, once this option is exercised, they will have to continue with the new regime for that year and all subsequent years.

(with inputs from multiple resources and people, including Sreelal).

Also published at LinkedIn and Medium.

Did your employer ever deny the Experience Certificate? Read on.

Indian labour laws are, majorly, employee-centric than employer-centric. Though this is the state of the act, most employees are not aware of their rights per various labour laws of the land. Or else, many employers purposefully do not educate their employees of the latter’s rights at the workplace.

One of the major threats many young professionals face from disgruntled employers is ‘we will not issue the experience certificate unless you do x or y‘. Not issuing an experience certificate is, unfortunately, used by many HRs and management as a tool to get something done by the employee. This something could be repayment of what the employee owes to the company, the employee not serving the notice period, etc.

Another common practice among some SMEs (I must admit that this trend is on a decline now) is to keep the originals of the employee’s certificates and mark lists with them until the term of employment/resignation. This is to make sure that the employee does not look for alternative employment whilst employed at the master organisation. Poor employee, s/he believes that the organisation has rights in their limit to do so and obeys this demand.

As it turns out (and it has always been like that), NO EMPLOYER is entitled to DENY experience certificates (service certificate in legal terms) to an employee or a former employee. If the employee demands such an experience certificate during or after the term of employment, the organisation is BOUND to issue one. To cite the labour law, 2J(3) of Kerala Shops and Commercial Establishments Act, 1961 mandates that the employer shall issue the service certificate in Form BE, within seven days from the receipt of such a request from the employee (every state has its own S&CE Act, and they will have similar provisions).

In a nutshell, employer cannot deny a service certficate (experience certficate) even if the employee is absconding or under a formal domestic enquiry for a gross misconduct. If the employer does not follow the request, the employee has the right to contact the District Labour Officer or the Labour Court thereafter for redressal.

Now, Section 5E of the aforementioned act says:

5E. Prohibition of retaining education certificate or experience certificate.—No educational certificate or experience certificate in original received from an employee shall be retained by the employer of any establishment at the time of appointment or during the course of employment.

This means, no establishment has the right to retain the originals of the experience certificate and/or educational certificates of their employees. Copies, however, can be maintained for record purposes, but originals have to be returned immediately after verification.

Ever denied justice? Talk to your HR first. If they do not fall in line, you now know what to do.

Also published at LinkedIn and medium.

Ordinance to make functioning easier: Kerala Shops and Commercial Establishments (Amendment) Ordinance, 2018

Kerala government recently published an ordinance amending certain provisions in the Kerala Shops and Commercial Establishments Act, 1960. There have been multiple amendment acts to the original said act, but this ordinance (which will hopefully be adopted as an amendment act by the next sitting of Kerala Legislative Assembly) comes with a purpose of easing the operations of Shops and Establishments while making it safer and humane for the employees. Let’s look at what are changing.

Definition of employee

The original act defines employee as ‘a person wholly or principally employed in, and in connection with, any establishment and includes an apprentices’. The new amendment extends this definition by suffixing ‘any class of persons as the Government may, by notification in the gazette, declare to be an employee for the purpose of this act.

Round the week functioning

The old act demanded that the shop/establishment should remain closed for at least one day per week, and such a day should be permanently displayed as a notice by the employer at a conspicuous location at the work place. Such a closed-day could not be altered by the employer for more than once in a period of three months, too.

With the amendment, the ‘shop/establishment must be closed for a day per week’ is removed, and it shrinks to allowing every employee to be entitled to one full day holiday per week, provided s/he has worked for at least 6 days in that week including all authorised leaves. This, in turn, allows the employer to function the shop/establishment round the week, with making the weekly holidays of employees rotate.

Curfew relaxed for women employees

The original acts mandated that no woman or any person who has not attained the age of seventeen shall be required or allowed to work whether as an employee or otherwise in any establishment before 6 A. M. or after 7 P. M.

The amendment relaxes the time limit from 7 PM to 9 PM. Here comes the historic change: the employer can now employ women employees between 9 PM and 6 AM (which was prohibited earlier) after getting the consent of such women employees. Further, such women employees must be working in a group of at least 5 employees wherein at least 2 are women.

Further, adequate security measures to ensure safety, honour, dignity, and protection from Sexual Harassment of women employees working during these hours should be ensured by the employer. Moreover, transportation from the workplace to the residence of such women employees should be arranged for by the employer (though the amendment does not provide that a security personnel accompany the women employees during this travel, it is implicit since the act talks about ‘safety’ measures—hence it would be wise to have the security measures as well taken care of during this travel).

Kerala’s IT Policy, earlier, gave relaxations to the above effects, but the amendment now extends this to all the sections of Shops and Establishments.

Scroll down to the bottom of this page for full version of the ordinance

Humane changes

There have been a lot of protests, especially from the textiles industry, regarding inhumane treatments by employers, where employees were not allowed to sit during work hours. Kerala Human Rights Commission had intervened in the issue long ago, and Kerala Government sympathised with the employees thus treated. With an insertion of a provision in the original act, 21B, the amendment officially and legally puts an end to such inhumane treatments

The amendment says that all the shops/establishments must provide suitable seating arrangements for their workers to avoid on-the-toe situations throughout the duty time. This will call for a drastic change in many of the industries coming under the definition of Shops/Commercial Establishments.

Fines gets finer!

The violation of various provisions in the act may now attract a fine of Rs. 1 lakh and 2 lakh respectively, which was as mere as Rs. 5000/- and Rs. 10000/- earlier. There are some changes to the calculation of such fine and fine for wilful obstruction of inspectors/labour/govt officers from carrying out their official duties, which are available in the PDF below.

Last but not the least – electronic age!

Earlier, employers needed to take special permission from the labour authorities before keeping employee data (muster rolls, payrolls, etc.) in digital format. This has been a point of debate by many, and the government is now forced to accept that things have really changed and people have started to migrate to the digital world, the condition of prior approval has been lifted in the amendment. Employers can now keep the data in digital formats as well, without any sort of permission/approvals.

Let me know your thoughts in comments! Below is the Amendment Ordinance. You can find the original act here.

Kerala-Shops-Commercial-Establishments-Amendment-Ordinance-2018

Regards,
Arunanand T A