Taxing Times

Above: The special provision for ministers was passed as law by the VP Singh government in 1981

By Atul Chandra in Lucknow

The Uttar Pradesh government has undone an almost four-decade-old law which allowed the state exchequer to pay the income tax of ministers of all ranks. This year, the bill totalled Rs 86 lakh. The special privilege was passed as law by the VP Singh government in 1981 as the chief minister and other ministers supposedly came from humble backgrounds and were deemed too poor to foot their own tax bills.

Called the Uttar Pradesh Ministers (Salaries, Allowances and Miscellaneous Provisions) Act, 1981, it was meant “to consolidate and amend the law relating to the salaries, allowances and other facilities to Ministers of the State of Uttar Pradesh”.

Section 3 of the Act reads:

“1. Every Minister and Minister of State shall be entitled, throughout the term of his office, to a salary of one thousand rupees per month.

“2. Every Deputy Minister shall be entitled, throughout the term of his office, to a salary of six hundred and fifty rupees per month.

“3. The salary referred to in sub-sections (1) and (2) shall be exclusive of the tax payable in respect of such salary (including perquisites) under any law relating to income tax for the time being in force, and such tax shall be borne by the State Government.”

On coming to know of the Act, the Yogi Adityanath government announced that the law would be repealed. He instructed Parliamentary Affairs Minister Suresh Khanna to prepare a cabinet note for approval before the assembly takes up the issue and in order to wash off “the sins of the Congress government”. It was a “sin” which all the successive governments in the state since 1981, including those of Kalyan Singh and Rajnath Singh of the BJP, chose not to cleanse as it suited them all.

So far, an estimated 1,000 ministers have been the beneficiaries of this law. Even Adityanath and his council of ministers have had their income tax for 2017-18 and 2018-19 paid by the state treasury. This, even as their salaries went up to Rs 40,000 after amendments to the Act by the Akhilesh Yadav government which, in 2016, retained sub-section 3 of the original Act. The total take-home salary of a minister after the 2016 amendment worked out to Rs 1.14 lakh per month.

It is preposterous that the state was paying income tax of its ministers even though their assets ran into crores. An ADR report of 2017 said that 35 of the then 44 BJP ministers were crorepatis. The average minimum asset owned by a minister was Rs 38 lakh, the report stated.

Affidavits filed by some chief ministers before the returning officer at the time of election show that Mayawati was worth Rs 111 crore in 2012, Akhilesh Yadav and wife Dimple were worth Rs 35 crore in 2019 and Adityanath had declared Rs 95,98,053 lakh worth of assets in 2017.

So what prompted the chief minister to repeal the controversial law? While one report said that some members of the present council of ministers wanted the privilege to end, a retired officer said that the decision was prompted by Prime Minister Narendra Modi’s decision to have income tax deducted from the Rs 1.30 crore which he got from the Seoul Peace Prize, 2018. The tax was waived by Finance Minister Nirmala Sitharaman. In a letter to the finance minister dated August 11, 2019, Modi said that in this regard, the law which applies to other citizens should be followed in his case too. He requested Sitharaman to withdraw her order making the prize money tax-free.

It is also possible that Adityanath decided to follow the example of Punjab which scrapped the law in 2018. At least three other states—Punjab, Haryana and Himachal Pradesh—had the legislation much before VP Singh thought of introducing it in UP. The other states where this controversial provision exists include Madhya Pradesh, J&K (now a Union Territory) and Chhattisgarh.

Uttarakhand, which was part of UP, retained the Uttar Pradesh law. It later enacted a new law in 2010 for its ministers whose salary, minus perks, was Rs 15,000 per month. The state has had eight CMs and dozens of ministers who availed of the legislative benefit. Chief Minister Trivendra Singh was also reported to have said that he would nullify the legislation.

Haryana and Himachal Pradesh have had the provision for payment of IT on its ministers’ salaries and allowances since 1970 and 1971, respectively. The Haryana Act also covered members of the legislative assembly, thereby adding to the burden on the exchequer. The explanation to Section 6 dealing with “Liability to pay income tax” says: “For the purpose of this section the (salary and allowances received by the Minister and the allowances received by him as a member of the Haryana Legislative Assembly) during any financial year shall be deemed to be his only income for that year.”

Himachal Pradesh amended the old law in 2000. In the new legislation, deputy ministers were kept out of the privileged category. As far back as 2000, the salary of ministers, including perquisites, in the state was over Rs 1 lakh per month. What is significant about this legislation is that “other sources of ministers’ income shall not be taken into consideration”.

In Punjab where this provision was in place since 1947, CM Amarinder Singh withdrew the facility by amending The East Punjab Ministers’ Salaries Act, 1947. The state treasury footed the tax bill of its ministers till March 28, 2018. J&K has had the legislation since 1981. It continues to be in place even after its reorganisation. In Madhya Pradesh, the provision has been in vogue with retrospective effect since 1994.

What is interesting is that none, barring a few, seems to be aware of the provision’s existence in Uttar Pradesh. The Uttar Pradesh Law Commission, which recommended repeal of scores of laws in 2017 and 2018, was also unaware of this special provision’s existence until a newspaper broke the story.

As the Uttar Pradesh CM recently spoke about scrapping archaic laws, the state law panel has taken to the task in dead earnest. A gazette notification was issued in 2018 on the passing of the Uttar Pradesh Appropriation Acts (Repeal) Act after the repeal of as many as 252 Acts of the state legislature. Most of these were Appropriation Acts pertaining to budgetary allocations starting from 1950.

This was followed by another set of enactments, 137 in all, which were being “wholly repealed throughout the state” as they had become “redundant, obsolete and unnecessary”. Of these, 95 Acts were repealed in 2018 after the then governor, Ram Naik, gave his assent to the Uttar Pradesh Repealing Bill, 2018. These included the Uttar Pradesh Primary Education Act, 1919, “which requires to be repealed in view of Uttar Pradesh Basic Education Act, 1972”. The Lucknow Universities Act of 1920 was itself repealed by Uttar Pradesh State Universities Act, 1973. Other Acts repealed included the Uttar Pradesh District Board Primary Education Act 1926, and The Motor Vehicles (Uttar Pradesh Amendment) Act, 1947.