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On Thursday, 12 September, The Times of India reported that since 1981, the government of Uttar Pradesh has been footing the bill for the income tax of every minister, deputy minister and minister of state.
Section 3(3) of the Uttar Pradesh Ministers (Salaries, Allowances and Miscellaneous Provisions) Act 1981 says that any income tax liable to be paid on the salaries of ministers, deputy ministers and ministers of state of the UP government, “shall be borne by the State Government.”
A subsequent investigation by The Quint has found that at least five other states in India have similar laws that require the state exchequer to pay income tax relating to the official salaries of ministers, and in some cases, other functionaries as well.
1. Uttarakhand
Since Uttar Pradesh has had this law since 1981, it was only logical that it also applied to the state of Uttarakhand, which was carved out of UP.
In 2010, Uttarakhand repealed the UP Act’s application to the state and passed its own law which specified that income tax payable on the salaries of the chief minister, ministers, ministers of state and deputy ministers would be borne by the state government.
2. Punjab
The state of East Punjab (as it then was) enacted the East Punjab Ministers Salaries Act, 1947. The state of Punjab passed another law for payment of salaries of deputy ministers in 1956, which was later extended to cover the chief parliamentary secretary and parliamentary secretary.
In 1976, five years before VP Singh enacted the UP law, new sections were inserted in both the Punjab laws, which said that the income tax payable on the salaries of ministers, deputy ministers, the chief parliamentary secretary and the parliamentary secretary would be payable by the state government. The leader of opposition was also given a similar benefit.
On 19 March 2018, the Punjab cabinet decided to repeal these provisions. However, the amendments do not appear to have been given effect on the statute book. On 6 August 2019, the Punjab Legislative Assembly passed new bills which clarified that income tax on perquisites and houses of these officials would continue to be paid by the government (see for example this report in The Tribune).
3. Haryana
Even before Punjab, the state of Haryana had enacted the Haryana Salaries and Allowances of Ministers Act, 1970, Section 6 of which said that the income tax payable on the salaries and allowances of its ministers would be “borne by the State Government.”
This exemption from paying tax on a minister’s income also applies to any allowances received by them as a member of Haryana’s Legislative Assembly.
4. Jammu & Kashmir
The state of Jammu & Kashmir passed a law in 1956 dealing with the salaries and allowances of its ministers and ministers of state, and another law in 1957 for those of its deputy ministers.
In 1981, Section 3 of both these laws was amended to say that any income tax payable by these functionaries on their official salaries/allowances – or any increase to the income tax payable by them because of their official salaries/allowances – would be “reimbursed and paid by the Government”.
The Fifth Schedule of the Jammu & Kashmir Reorganisation Act 2019 specifies that these two laws will remain in force even after the reorganisation of the state into two union territories comes into force on 31 October.
5. Himachal Pradesh
The Salaries and Allowances of Ministers (Himachal Pradesh) Act was passed in 2000. According to Section 12 of this Act:
“The salary and allowances payable to a Minister and furnished house and other perquisites admissible to him, under this Act, shall be exclusive of income tax which shall be payable by the State Government.”
The 2000 Act repealed laws passed in 1971 which similarly exempted the salaries and allowances of ministers and deputy ministers. The income tax payable by deputy ministers is no longer borne by the public exchequer in Himachal Pradesh.
Will These States Also Amend Their Laws?
On Friday, 13 September, a day after the TOI report on the UP law, Uttar Pradesh Chief Minister Yogi Adityanath reportedly decided to repeal Section 3(3) of their Act, so that the state government would no longer bear the brunt of paying the ministers’ income taxes. He has set the procedure in motion for this to be adopted by the UP Cabinet and then proposed before the UP Legislative Assembly.
Much like UP, it does not appear that there is any reasonable rationale for the ministers and other functionaries of these other five states to be exempted from paying income tax on their official salaries, given the large wealth of most MLAs. It will be interesting to see if they also decide to repeal the provisions of their laws that impose this burden on the public exchequer.
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