A Decade-Old Legal Victory: A Cue for RRBs to Challenge Tax on Perquisites

Employees of Regional Rural Banks (RRBs) across India are grappling with unilateral tax deductions on perquisites, a move that has sparked widespread discontent. As frustration mounts over bank-imposed tax burdens, a landmark 2015 legal ruling in Andhra Pradesh Grameena Vikas Bank (APGVB) offers a precedent that could guide unions and employees in their fight against unfair deductions.

The case, which resulted in a court order directing APGVB management not to deduct tax on perquisites from employees' salaries, remains a crucial reference point. At the core of the dispute is the taxation of perquisites which refers to the tax deducted from an employee’s salary for benefits provided by the employer, such as housing, loans, or allowances, which are considered additional income.

High Court’s Order: A Strong Message to RRBs

In 2015, in a landmark judgment, the High Court of Judicature at Hyderabad ruled in favor of employees of the erstwhile APGVB (now Telangana Grameena Bank) over the bank’s management. The court, in its judgment, emphasized the unjust nature of these deductions and upheld the rights of employees. Quoting the order, the ruling stated: “Bank shall not deduct the income tax component on the monetary value of the perquisites paid by it, to its employees.”

Image: High Court order directing APGVB management to not deduct tax on perquisites

This directive forced the APGVB management to comply, ensuring that employees were no longer burdened with unexpected salary cuts due to tax deductions on perquisites.

The petition against tax deduction was filed by N. Prakasham, General Secretary of the APGVB Officers Association and K. Bikshamaiah, General Secretary, APGVB Employees Association, successfully challenged the unilateral deductions imposed by the bank.  

N. Prakasham emphasized the broader impact of the order and told Kanal, “The court’s directive mandating bank managements to bear the tax on perquisites is a landmark victory for Gramin Bank employees. However, this should not remain an isolated success—it must serve as a catalyst for trade unions and employees nationwide to demand and achieve the same rights.”

He further added, “The verdict not only provided relief to APGVB employees but also set a benchmark for other RRBs, reinforcing that the burden of tax on perquisites should not fall on employees. The ruling remains highly relevant today, as most of the RRBs in India continue to deduct the tax from employees’ salaries, despite rising opposition from banking unions.”

Watch: AIRRBEA Leader on Fighting Perquisite Tax in RRBs

Ongoing Distress Among RRB Employees

Despite the landmark legal victory in APGVB, the issue of unilateral tax deductions on perquisites remains unresolved in most RRBs, leaving employees burdened by unjust financial deductions.

The discontent is spreading across multiple banks, with employees in Prathama UP Gramin Bank, Baroda UP Bank, Sarva Haryana Gramin Bank, and Utkal Grameen Bank raising concerns over management’s failure to absorb the tax burden.

APGVB’s successful legal battle stands as a strong precedent, proving that unions can effectively challenge unfair taxation and protect employees' financial interests. With unrest mounting, the question now is—will other RRBs follow suit, or will more unions be forced to take the legal route to seek justice?