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Tuesday, June 15, 2010

Retirement benefits not to be taxed: Govt

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Retirement benefits not to be taxed: Govt

The government said provident funds would not be taxed on withdrawal and dropped a proposal to levy Minimum Alternate Tax from corporates based on their assets from the revised draft Direct Taxes Code.
The Code, released for public discussion, does not give any details on the Income Tax structure such as the slabs or rates, which were provided in the first draft released in August 2009.

Based on the outcome of discussion on the revised draft code, the government will bring in a new Income Tax legislation to replace the archaic Act of 1961.

Revenue Secretary Sunil Mitra said the taxation rates in the first draft, which suggested 10 per cent tax on income from Rs 1.60-10 lakhs and 20 per cent on income between Rs 10-25 lakhs and 30 per cent beyond that, were illustrative.

He said the tax rates would be made known only in the proposed Act, a bill for which will be introduced in Parliament in the coming monsoon session.

"As of now, it is proposed to provide the EEE (Exempt- Exempt-Exempt) method of taxation for Government Provident Fund (GPF), Public Provident Fund (PPF) and Recognised Provident Funds (RPF) ...", the revised DTC released by the Finance Ministry said.

The revised draft also puts pensions administered by the interim regulator PFRDA, including pension of government employees who were recruited since January 2004, under EEE treatment.


THE DIRECT TAXES CODE JUNE 2010 - REVISED DISCUSSION PAPER

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REVISED DISCUSSION PAPER
ON
THE DIRECT TAXES CODEJUNE 2010
Central Board of Direct TaxesDepartment of RevenueMinistry of Finance

CHAPTER II

TAX TREATMENT OF SAVINGS – EXEMPT EXEMPT TAX (EET)VIS-A-VIS EXEMPT EXEMPT EXEMPT (EEE) BASIS
1. Chapter-XII of the Discussion Paper on the Direct Taxes Code (DTC) deals with tax incentives for savings. It proposes the "Exempt-Exempt-Taxation‟ (EET) method of taxation for savings. Under this method, the contributions towards certain savings are deductible from income (this represents the first 'E' under the EET method), the accumulation/accretions are exempt (free from any tax incidence) till such time as they remain invested (this represents the second "E‟ under the EET method) and all withdrawals at any time are subject to tax at the applicable marginal rate of tax (this represents the "T‟ under the EET method).

1.1 Based on the EET principle, the Code provides for deduction in respect of aggregate contributions upto a limit of three hundred thousand rupees (both by the employee and the employer) to any account maintained with any permitted savings intermediary, during the financial year. This account will have to be maintained with any permitted savings intermediary in accordance with the scheme framed and prescribed by the Central Government. The permitted savings intermediaries will be approved provident funds, approved superannuation funds, life insurer and New Pension System Trust. The accretions to the deposits will remain untaxed till such time as they are allowed to accumulate in the account. Any withdrawal made, or amount received, under whatever circumstances, from this account will be included in the income of the assessee under the head 'income from residuary sources', in the year of such withdrawal or receipt. It will accordingly be subject to tax at the applicable personal marginal rate of tax.

1.2 Taxation on EET basis is proposed to be prospective. The DTC provides that the withdrawal of any amount of accumulated balance as on the 31st day of March, 2011 in the account of the individual in a Government Provident Fund (GPF), Public Provident Fund (PPF), Recognised Provident Funds (RPFs) and the Employees Provident Fund (EPF) will not be subject to tax. Therefore, only new contributions as well as accretions on or after the commencement of the DTC, will be subject to the EET method of taxation.

1.3 The permitted savings intermediaries would be approved by the Pension Fund Regulatory and Development Authority (PFRDA). These intermediaries will, in turn, invest the amounts deposited with them in government securities, term deposits of banks, unit-linked insurance plans, annuity plans, bonds and securities of public sector companies, banks and financial institutions, bonds of other companies enjoying prescribed investment grade rating, equity linked schemes of mutual funds, debt oriented mutual funds, equity and debt instruments. The choice of instruments will, in some schemes, be with the investor and in some others with the trustees of the schemes. The pattern of investment by the latter will be as prescribed. The rollover of any amount received, or withdrawn, from one account with the permitted savings intermediary to any other account with the same or any other permitted savings intermediary will not be treated as withdrawal and, accordingly, will not be subject to tax.

2. A large number of representations have been made with regard to the proposed EET system. It has been stated that most countries that follow the EET method of taxation of savings also have a social security system in place for all their citizens. The EET savings accounts which operate for individuals in these countries are over and above the mandatory social service payments received by them. It has been represented that in India, in the absence of a universal social security system, the proposed EET method of taxation of permitted savings would be harsh. Tax payers require some flexibility in making withdrawals in lump sum without being subjected to tax. People may need lump sum funds on retirement for various family obligations. Requests have therefore been made for continuation of Exempt Exempt Exempt (EEE) method of tax treatment of investments. Alternatively, the application of EET should be restricted to new savings instruments after the date from which the DTC comes into effect, and it should not apply to existing saving instruments.

3. Universal social security benefits for tax payers may not be feasible in the near future. Also, switching over to a complete EET method of taxation for all savings instruments would entail many administrative, logistical and technological challenges. It would require a vast network of permitted savings intermediaries, a central record keeping authority and a central agency to service around more than three crore accounts and deduct tax at the time of withdrawals. The segregation of taxable and non-taxable amounts at the time of withdrawal and rollover from one account to another would introduce complexities and create practical difficulties.

3.1 Therefore, as of now, it is proposed to provide the EEE method of taxation for Government Provident Fund (GPF), Public Provident Fund (PPF) and Recognised Provident Funds (RPFs) and the pension scheme administered by Pension Fund Regulatory and Development Authority. Approved pure life insurance products and annuity schemes will also be subject to EEE method of tax treatment. In order to achieve the objective of long term savings, the rules for contribution as well as withdrawal will be harmonised and made uniform so that such savings are actually made and utilised by the taxpayer for the long term. Investments made, before the date of commencement of the DTC, in instruments which enjoy EEE method of taxation under the current law, would continue to be eligible for EEE method of tax treatment for the full duration of the financial instrument.


CHAPTER IV
TAXATION OF INCOME FROM HOUSE PROPERTY

1. Chapter VIII of the Discussion Paper on the draft Direct Taxes Code (DTC) deals with the computation of income from house property. “Income from house property” is one of the five heads under which accruals or receipts relating to ordinary sources of income are to be classified. The Discussion Paper states that income from house property, which is not occupied for the purpose of any business or profession by its owner, is to be taxed under this head. The Discussion Paper proposes a new scheme for computation of income from house property in the draft DTC, the salient features of which are:

(a) Income from house property shall be the gross rent less specified deductions.

(b) Gross rent will be higher of
(i) the amount of contractual rent for the financial year; and
(ii) the presumptive rent calculated at six per cent per annum of the ratable value fixed by the local authority. However, in a case where no ratable value has been fixed, six per cent shall be calculated with reference to the cost of construction or acquisition of the property. If the property is acquired during the financial year, the presumptive rent shall be calculated for the proportionate period of that financial year.

(c) The advance rent will be taxed only in the financial year to which it relates.

(d) The gross rent of one self-occupied property will be deemed to be nil, as at present. In addition, the gross rent of any one palace in the occupation of a ruler will also be deemed to be nil, as at present.

(e) The following deductions will be admissible against the gross rent:- (i) Amount of taxes levied by a local authority and tax on services, if actually paid. (ii) Twenty per cent of the gross rent towards repairs and maintenance as against thirty per cent at present. (iii) Amount of any interest payable on capital borrowed for the purposes of acquiring, constructing, repairing, renewing or re-constructing the property.

(f) In the case of a self-occupied property where the gross rent is deemed to be nil, no deduction for taxes or interest will be allowed.

(g) The income from property shall include income from the letting of any buildings along with any machinery, plant, furniture or any other facility if the letting of such building is inseparable from the letting of the machinery, plant, furniture or facility.

2. The most frequent feedback on computation of income from house property has been the determination of notional rent on presumptive basis (at the rate of 6%) with reference to the cost of construction/ acquisition. The input is that this is inequitable as it discriminates against recent owners as such cost is a function of inflation. The other major issue which has been raised is that, in order to incentivize investment in housing, the deduction for interest on capital borrowed for acquisition or construction of a self occupied house property, up to a ceiling of Rs. 1.5 lakhs, as available in the existing provisions of the Income-tax Act, 1961 should be retained.

3. The determination of notional rent for computing income from house property has been a cause for much litigation. Internationally also, in most jurisdictions, income from house property is taxed on the basis of rent from letting out of property.

3.1 Taking the above factors into account, the following modifications are proposed: (a) In case of let out house property, gross rent will be the amount of rent received or receivable for the financial year. (b) Gross rent will not be computed at a presumptive rate of six per cent of the rateable value or cost of construction/acquisition. (c) In case of house property which is not let out, the gross rent will be nil. As the gross rent will be taken as nil, no deduction for taxes or interest etc., will be allowed. However, in case of any one house property, which has not been let out, an individual or HUF will be eligible for deduction on account of interest on capital borrowed for acquisition or construction of such house property (subject to a ceiling of Rs. 1.5 lakh) from the gross total income. The overall limit of deduction for savings will be calibrated accordingly.
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Government Announces Major Benefits for Master Craftsman

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Government Announces Major Benefits for Artisan Employees

In a move that would benefit several employees, the Government has approved the restructuring of Cadre of Artisan Staff in Defence Establishments by partially amending the recommendations of 6th Central Pay Commission.

The grade structure in the industrial as well as in the non-industrial trades, wherever already available and the pay scales of the Defence artisan staff shall stand modified w.e.f. 1.1.2006 as under:

(1)Skilled - Pay Band PB-I Grade Pay Rs. 1900
(2)Highly Skilled Grade II - Pay Band PB-I Grade Pay Rs. 2400
(3)Highly Skilled Grade I - Pay Band PB-I Grade Pay Rs. 2800
(4)Master Craftsman - Pay Band PB-2 Grade Pay Rs. 4200

Wherever the grade structure in the Industrial as well as Non-Industrial trades is already existing in the ratio of 45:55, the erstwhile Skilled and Highly Skilled, and 25% of Highly Skilled in the grade of Master Craftsman, the following will apply:

45% of the posts may be granted the pay scale of Skilled Worker (Grade pay of Rs. 1900 in the Pay Band PB-1);

25% of remaining 55% may be granted the pay scale of Master Craftsman (Grade Pay of Rs. 4200 in the pay band PB-2);

The remaining posts may be divided in a ratio of 50:50 and redesignated as Highly Skilled Worker Grade-II (Grade Pay of Rs. 2400 in pay band PB-1) and Highly Skilled Worker Grade-1 (Grade pay of Rs. 2800 in pay band PB-1).

The placement of the individuals in the posts resulting from the restructuring shall be made w.e.f. 1.1.2006, in relaxation of the conditions, if any, i.e trade test etc. as one time measure.

Highly Skilled Grade I shall be en-bloc senior to Highly Skilled Grade II.

The Post of Master Craftsman shall be part of the hierarchy and the placement of Highly Skilled Grade I in the grade of Master Craftsman will be treated as promotion.

In the case of Defence Establishments where there is no category of Skilled Workers and direct recruitment is made 100% at the level of Highly Skilled, the posts of Master Craftsman existing as on 1.1.2006 will be placed in PB-2 + GP-4200 and the remaining posts of Highly Skilled Workers may be bifurcated in HS-I and HS-II in the ratio of 50:50.


ADASA Members of Hyderabad met Shri Raghavaiah, JCM Member on12.06.2010

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ADASA Members of Hyderabad met Shri Raghavaiah, JCM Member on12.06.2010.

Mr Naga Raju and Mr Satish menon, Mohan Reddy along with other members have explained the financial losses due to the MACPs and its adverse effects. Particularly how it has become curse on the cadres of LDC/UDCs in our Department due to the non-grant of Hierarchal grade pay.

Shri Raghavaiah while agreeing with the argument, has explained the members that the issue has been taken up in the committee and said to solve the MACP problems by suggesting to grant

1) One Time option to prefer ACP or MACP

2) Grant of MACP Scheme w.e.f. 01.01.2006. He has also explained the developments on various issues being taken in Anomaly Committee in regard to VI CPC. Members have also brought the recovery of arrears from staff who are granted First/Second ACP between 01.01.2006 to 31.08.2008. Members have also brought the disparity in merging the pay scales of 5000-8000, 5500-9000, 6500-10500 by fixing Rs.9300 as minimum of scale instead of Rs.12,090/-.

After listening to the members Shri Raghavaiah, the issue will be taken up in the committee and with regard to recovery of arrears; it was already suggested to waive the recoveries from employees who were granted ACP between 01.01.2006 to 31.03.2008.

Further he informed that the disparity in fixing the minimum scale of merger scales has also been taken up. Members have expressed sincere thanks for the efforts being made towards the up-liftment of central Government employees.


source: ADASANC



Revised percentage of Cadre Restrucuring Percentage in Railways

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This is the Fax Message from NFIR General Secretary regarding the Cadre Restructuring Meeting held at Rail Bhavan, New Delhi on 04.06.2010.

The revised percentage of Cadre Restrucuring Percentage has been finalized in that meeing as given below...


Category Pay Band Grade Pay Existing %age Agreed percentage
Asst. Station
Masters/Station Masters
PB-1
PB-2
PB-2
Rs.2800
Rs.4200
Rs.4600
8.5%
63%
28.5%
8%
55%
37%
Enquiry cum
Reservation Clerks (ECRC)
PB-1
PB-2
PB-2
Rs.2800
Rs.4200
Rs.4600
35%
53%
12%
27%
55%
18%
Ticket Checking Staff PB-1
PB-1
PB-2
PB-2
Rs.1900
Rs.2800
Rs.4200
Rs.4600
17%
28%
43%
12%
14%
24%
44%
18%
Commercial Clerks PB-1
PB-1
PB-2
PB-2
Rs.2000
Rs.2400
Rs.4200
Rs.4600
17%
28%
43%
12%
14%
24%
44%
18%


Click here to view the Fax Letter


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