Highlights

• Higher salaries and arrears received may increase tax slab
• Tax Laws provide relief to employees due to delay in receipt of arrears
• The tax relief can be claimed under Section 89(1)

In Seventh Pay Commission bonanza, lakhs of central government employees will soon receive higher salaries and arrears in one go. This may result in an increase in the tax slab of many employees as they will receive arrears from January 1, 2016.

Suppose an employee’s annual salary is Rs 9.50 lakh and receives Rs 1 lakh as arrears, of which Rs 50,000 is for the previous fiscal year. His/her tax slab will change. The total income for this year will be Rs 10.50 lakh as against Rs 10 lakh (including the arrears of this year). Income of individuals above Rs 10 lakh is taxed at the rate of 30 per cent while income between Rs 5 lakh and Rs 10 lakh is taxed at the rate of 20 per cent.

So will employees have to pay an extra tax? No.

There are provisions which provide tax relief to employees due to delay in the receipt of the arrears.

“If an employee or his family receives pension arrears or salary arrears, he or she can claim tax relief under Section 89(1). This Section makes sure you don’t end up paying higher tax due to moving up a tax slab from receipt of arrears. Or because tax slab rates in the year of receipt are higher as compared to the year to which arrears belong to,” says Preeti Khurana, chief editor of Cleartax portal.

How the tax relief is calculated

The tax break is arrived at by recalculating the tax for the both the years in which the arrears are received and the year to which arrears pertain to.

1) Calculate the tax payable on the total salary including and excluding the arrears in the year in which it is received. Calculate the difference between the two and assume it is ‘A’

2) Calculate the tax payable on the total salary including and excluding the arrears for every year for which the arrear relates to and sum it up. Calculate the difference between the two and assume it as ‘B’.

3) If ‘A’ is more than ‘B’, the employee will get tax break equivalent to ‘A’.

How it can be claimed

To avail the tax break, it is mandatory under the income tax laws to file Form 10E. The form includes details like the PAN, arrear and advance salary details. This form has to be uploaded on the website of the Income Tax Department.

Source : http://profit.ndtv.com/

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Unhappy with 7th Pay Commission hike, government employees to go on strike on July 11

The 7th Pay Commission report that received a nod from the Cabinet chaired by Prime Minister Narendra Modi, will levy a pay hike of 23.55%.

Nearly 32 lakh central government employees have announced they will be going on a strike starting July 11, protesting against the 23.55% salary hike approved by the Cabinet on Wednesday, Zee Business channel news frash indicated.

Earlier in the day the Cabinet approved the recommendations put forth by the 7th Pay Commission panel, which will impact the salaries of one crore government employees.

Under the final approval, the basic salary of government employees will be hiked by 15% and the overall 7th Pay Commission pay hike stands at 23.55%. The central government employees, unhappy with the rate of pay hike had warned earlier that they will stage a strike on July 11, demanding a pay rise of atleast 30%.

At current levels, the salary hike is the lowest in 70 years, but a senior government official stated tight fiscal situation as the reason, stating that a provision to increase it to 18-20% was still open.

On July 4, M Krishnan, Secretary General of the Confederation of Central Government Employees and Workers issued a notice to the employees who are member and affiliated organisations regarding the pursuance of an indefinite strike from July 11 2016.

Krishnan had earlier said that if the government adopts delayed tactics or issue unilateral orders rejecting our demands, then confrontation shall become inevitable.

The Confederation of Central Government Employees & Workers on June 27, also put up a notice calling for an indefinite strike from July 11 and demonstrations and rallies in front of all important government offices and centres from July 4 to July 10.

Source: dnaindia

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The Union Cabinet is likely to take up today Seventh Pay Commission recommendations (File photo)

Highlights

•     Pay Commission recommended 23.55% hike in salaries, allowances, pensions
•     This will put added burden of Rs. 1.02 lakh crore on exchequer annually
•     Sources say the Finance Minister has made provisions for the payout

New Delhi:  The Union Cabinet may clear the Seventh Pay Commission today that would hike the salaries and allowances for over one crore central government employees and pensioners by at least 23.5 per cent.

Implementation of new pay scales recommended by the 7th Pay Commission is estimated to put an additional burden of Rs. 1.02 lakh crore on the exchequer annually or nearly 0.7 per cent of GDP. The hike, however is the lowest in last seven decades.

The government however is eyeing the economic push the move will provide to the sluggish demand scenario in the economy.

The panel headed by Cabinet Secretary PK Sinha was set up to study the recommendations of the pay commission headed by Justice AK Mathur.  The committee has submitted its report to the Finance Ministry.

The move will impact the remuneration of nearly 50 lakh central government employees and 58 lakh pensioners. The changes are likely to be implemented from January 1, 2016.

The key recommendation of the 7th Pay Commission is a 23.55 per cent increase in salaries, allowances and pension of central government employees and pensioners. This is built around the recommendation for a 14.27 per cent hike in basic pay.

Of the total cost of Rs. 1,02,100 crore, pay increase would cost Rs. 39,100 crore, increase in allowances Rs. 29,300 crore and increase in pension Rs. 33,700 crore.

Based on the proposed rate of hike, Rs. 73,650 crore of the total payout will come from the general budget, while Rs. 28,450 crore will come from the Railways.

One of the key changes suggested by the pay commission has been the ‘New Pay Structure’, under which the existing system of pay bands and grade pay will be ejected and a new pay matrix will be brought in to bring about more transparency.

The 6th Pay Commission had recommended a 20 percent hike which was eventually doubled when it was implemented in 2008.

The highest pay is pegged at Rs. 2,25,000 per month for apex scale and Rs. 2,50,000 per month for cabinet secretary and others at the same pay level.

The rise will be more than double as the current pay in this scale is Rs. 90,000 per month. With this hike several senior government posts will get a salary higher than lawmakers in Parliament.

The move has led to the discontent among the lawmakers who allege disparity. However, the government is also considering a hike in salaries and allowances of lawmakers.

The minimum pay recommendation is Rs. 18,000 per month. This too is more than double of the present Rs. 7,000.

The commission has also recommended a hike in the annual increment rate to 3 per cent from the existing 2.5 per cent, increased HRA and enhanced gratuity.

Sources say Finance Minister Arun Jaitley has made provisions for the payout. Though the government is making an effort to increase revenue by bringing more under the tax net, the payout will reduce the government’s kitty. Especially, because the Centre also needs about Rs. 70,000 crore to meet the One Rank One Pension (OROP) commitment.

But the government is not complaining. The huge payout, once implemented, will boost the consumption demand at a time when the economy is moving sluggishly due to poor demand.

A finance ministry source said, “Government employees are traditionally known to invest pay commission benefits into few specific sectors like real estate. If they follow the tradition, the real estate sector hit by poor demand may turn out to be the biggest beneficiary.”

While some experts believe that the additional cash in the market may fuel an inflationary trend, experts say that the impact of the pay commission may become a turning point for the Prime Minister Narendra Modi’s government to trigger demand that drives growth investment and profits.

Via: NDTV

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As much as Rs 70,000 crore has been provisioned in the Union Budget 2016-17 for implementation of Seventh Pay Commission for government employees, a top finance ministry official said.

While the Budget did not provide an explicit overall provision number, the government had said the Seventh Pay Commission hike has been built in as interim allocation for different ministries and Budget numbers were credible.

Implementation of the pay commission report in toto is to cost the government Rs 1.02 lakh crore.

“We have provisioned for around 60-70 per cent of the total burden that was talked about,” the official said adding about Rs 70,000 crore has been provided in the Budget.

“We will wait to see the report of the Committee of Secretaries on the Seventh Pay Commission and decide if we need further allocation,” he said.

The Budget document states that “the implementation of the Seventh Pay Commission due from January 1, 2016 is to be implemented during 2016-17 fiscal as also the revised One Rank One Pension (OROP)scheme for Defence services.”

The finance ministry has provisioned for this in the Demands for Grants for individual departments and ministries. It is built into and subsumed into those allocations.

“No one actually knows what will be the actual burden on the exchequer for the implementation of Pay commission recommendation. We have calculated internally and allocated to various ministries and departments accordingly,” the official said.

The government in January set up a high-powered panel headed by Cabinet Secretary P K Sinha to process the recommendations of the seventh Pay Commission which will have bearing on the remuneration of 47 lakh central government employees and 52 lakh pensioners.

The Empowered Committee of Secretaries will function as a Screening Committee to process the recommendations with regard to all relevant factors of the Commission in an expeditious detailed and holistic fashion.

The official further said the finance ministry has fully provided for OROP scheme for defence personnel.

Faced with the burden of Pay Commission recommendations, there were concerns on whether the government would be able to stick to the fiscal deficit target of 3.9 per cent for 2016-17.

However, in Budget Finance Minister Arun Jaitley dispelled doubts and promised to adhere to the fiscal consolidation roadmap and stick to 3.9 per cent deficit target.

PTI

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NEW DELHI: A salary hike for lakhs of government employees will be delayed by two months by a panel that decides on their salaries, according to sources.

The 7th Pay Commission is not expected to lower or increase the retirement age for 54 lakh government employees, but its final report on salary hike that was to be submitted to the Centre by the end of this month, has been delayed till September 15.

According to sources, there will be no interim report of the Commission, and the new wage salary whenever accepted by Prime Minister Narendra Modi’s National Democratic Alliance, will be effective from January 1 next year.

The chairman of the 7th Pay Commission, Justice AK Mathur has asked for a two month extension from the government. The Commission was appointed by the previous UPA regime in February 2014, and was given 18 months to submit its report.

Nearly 90 per cent of government employees work in the armed and paramilitary forces, while others are in railways and postal department.

Sources said that the Commission was hoping that the government would take a call on One Rank One Pension, so they could modulate their own formulation in terms of pay revision.

The Commission is also expected to take a call on lateral entry and performance based pay, which has been discussed for years, but with no real solution.

During the monsoon session of Parliament earlier this month, the Medium-Term Expenditure Framework Statement tabled in Parliament said, that the salary outgo of central government employees will rise 9.56 per cent to Rs. 1,00,619 crore in the current fiscal year.

Next year, it could increase further at 15.79 per cent to nearly Rs. 1.16 lakh crore, with the likely implementation of the 7th Pay Commission award, said the statement tabled by Finance Minister Arun Jaitley.

Source: NDTV

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