Seventh pay commission recommends overall hike of 23.55%

The total increase, including the additional outgo on account of pensions, is estimated to be 23.55%. 

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In the new year, central government employees can look forward to fatter pay cheques and heftier allowances.
The seventh pay commission on Thursday recommended an average 23.55% increase in their salary, allowances and pension, a move that will benefit 4.8 million staffers and 5.5 million pensioners. The hike will be effective from January 1, 2016.
A minimum pay of Rs 18,000 per month and a maximum of Rs 2.5 lakh has been recommended by the commission, headed by justice (retired) AK Mathur, that presented its 900-page report to finance minister Arun Jaitley.
More cash in hand is likely to result in higher consumption by the government’s massive employee base, which accounts for a large segment of the Indian middle-class. More demand could boost the economy through higher spending on assets such as cars and housing.
Read| Seventh pay commission: IAS versus non-IAS turf war divides panel
The government usually accepts the broad proposals for pay revision — due every 10 years — and state governments usually respond with their own hikes.
Jaitley said a secretariat will be set up to implement the pay panel recommendations. A separate empowered committee of various departments will examine the suggestions of the panel.
“The recommendations will be examined expeditiously and the government will take a final decision,” Jaitley said.
The government’s spending on employee payouts will rise by Rs 1.02 lakh crore. Of this, expenditure on salaries will go up by Rs 39,100 crore and allowances by Rs 29,300 crore, while revised pensions would Rs 33,700 crore.
A fresh IAS recruit will get a basic salary of Rs 56,000 a month against Rs 23,000 currently, while a sepoy in the Indian Army will earn Rs 21,700 per month from Rs 8,460 currently. In addition, employees are paid dearness allowance and house rent among many other allowances.
If accepted, the new proposals will set Rs 18,000 as the minimum pay of an employee on the central government’s rolls. At present the minimum salary is Rs 7,000.
Read: ‘Equitable’ pension formula like OROP recommended by pay panel
The total emoluments of a general helper -- the lowest ranked employee – amount to Rs 22,579, more than double that of his counterpart in the private sector, a study commissioned by the panel found.
The commission has proposed a change in the salary structure by doing away with the system of pay bands and grade pay and recommended “pay matrix”. It has also called for scrapping overtime allowance and interest-free loans to buy motor vehicles.
House rent allowance – a key perk -- has also been rationalized at 24%, 16% and 8% of the basic pay, depending on the city where the employee works, and would increase when the dearness allowance crosses 50% and 100%.
Read|  Seventh pay commission: Hike comes with Rs1 lakh cr fiscal burden
Since the government’s overall expenditure will increase, its fiscal deficit -- the difference between what it earns and spends – will also widen by 0.65 percentage points and likely make an impact on the deficit-reduction target of 3.5% for the next financial year (2016-17).
The government’s overall payout will be lower because of no arrears this time, compared to the previous pay commission, which came in late.
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‘Equitable’ pension formula like OROP recommended by pay panel

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income tax- senior citizen



Tax Rates

Assessment Year 2015-16

Taxable income	Tax Rate
Up to Rs. 3,00,000	Nil
Rs. 3,00,000 - Rs. 5,00,000	10%
Rs. 5,00,000 - Rs. 10,00,000	20%
Above Rs. 10,00,000	30%

Less: Rebate under Section 87A [see Note]

Add: Surcharge and Education Cess [see Note]

Note:

(a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 10% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

(b) Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by education cess calculated at the rate of two per cent of such income-tax and surcharge.

(c) Secondary and Higher Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by secondary and higher education cess calculated at the rate of one per cent of such income-tax and surcharge.

(d) Rebateunder Section 87A:The rebate is available to a resident individual if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 2,000, whichever is less.

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Taxability of Retirement Benefits

On retirement, an employee normally receives certain retirement benefits. Such benefits are taxable under the head 'Salaries' as 'profits in lieu of Salaries' as provided in section 17(3). However, in respect of some of them, exemption from taxation is granted u/s 10 of the Income Tax Act, either wholly or partly. These exemptions are described below:-

Gratuity [Section 10(10)]:

1. Any death cum retirement gratuity received by Central and State Govt. employees, Defense employees and employees in Local authority shall be exempt.
2. Any gratuity received by persons covered under the Payment of Gratuity Act, 1972 shall be exempt subject to following limits:-
   • For every completed year of service or part thereof, gratuity shall be paid at the rate of 15 days' salary based on the salary last drawn by the concerned employee. Salary for this purpose will include basic salary and dearness allowance only. 15 days salary is to be computed by the formula 15 days' salary = Salary last drawn x 15/26.
   • The amount of gratuity as calculated above shall not exceed Rs. 10,00,000/-.
3. In case of any other employee, gratuity received shall be exempt, subject to the following exemptions
   • Exemption shall be limited to 15day salary (based on last 10 months average salary*) for each completed year of service or Rs. 10,00,000/- whichever is less.
     • While computing year of service, any fraction of year is to be ignored.
     • Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.
     • * Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month (not the day) of retirement.
   • Where the gratuity was received in any one or more earlier previous years also and any exemption was allowed for the same, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 10,00,000/-.

The exemption in respect of gratuity is permissible even in cases of termination of employment due to resignation. The taxable portion of gratuity will quality for relief u/s 89(1).
Gratuity payment to a widow or other legal heirs of any employee who dies in active service shall be exempt from income tax.

Commutation of Pension [Section 10(10A)]:

1. In case of employees of Central & State Govt., Local Authority, Defense Services and corporations established under Central or State Acts, the entire commuted value of pension is exempt.
2. In case of any other employee
   • If the employee receives gratuity, one third of full value of commuted pension will be exempt from tax under section 10(10A)(ii)(a).
   • If the employee does not receive gratuity, one half of full value of commuted pension will be exempt from tax under section 10(10A)(ii)(b).

Leave Encashment [Section 10(10AA)]:

1. Leave Encashment during service is fully taxable in all cases, relief u/s 89(1), if applicable, may be claimed for the same.
2. Payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.
3. In case of other employees, the exemption is to be limited to a maximum of 10 months of leave encashment, based on last 10 months average salary. This is further subject to a limit of Rs. 3,00,000/-.
4. Leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable.
5. Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under sub-clause 42 shall not exceed the specified limit i.e. Rs. 300000/-.

For the purpose of Section 10(10AA), the term 'Superannuation or otherwise' covers resignation.

Retrenchment Compensation [(Section 10(10B)]:

Retrenchment compensation received by a workman under the Industrial Dispute Act 1947 or any other Act or Rules is exempt subject to following limits:

1. Compensation calculated @ fifteen days average pay for every completed year of continuous service or part there of in excess of 6 months.
2. The above is further subject to an overall limit of Rs. 5,00,000/- for retrenchment on or after 1.1.1997.

Compensation on Voluntary Retirement or 'Golden Handshake' [Section 10(10C)]:

1. Payment received by an employee of an undertaking specified in section 10(10C) at the time of voluntary retirement, or termination of service is exempt to the extent of Rs. 5 Lakh:
2. The voluntary retirement Scheme under which the payment is being made must be framed in accordance with the guidelines prescribed in Rule 2BA of Income Tax Rules.
3. Where exemption has been allowed under above section for any assessment year, no exemption shall be allowed in relation to any other assessment year.

Provident Fund

Taxability of Contribution by Employer, Employee, Interest credited to various types of Provident Funds and payment received therefrom:

	Statutory Provident Fund	Recognised Provident Fund	Un-recognised Provident Fund	Public Provident Fund
Employer's contribution	Exempt	Exempt upto 12% of salary (#)	Exempt	Not Applicable
Benefit of deduction u/s 80C for Employee's contribution	Yes	Yes	No	Yes
Interest credited	Exempt	Exempt if rate of interest is upto 9.5%. Interest in excess of 9.5% is charged to tax.	Exempt	Exempt
Amount received on termination of service	Exempt	If certain conditions are satisfied, then lump sum amount is exempt from tax (##)	(###)	Exempt from tax

(#) Salary for this purpose will include the following :

• Basic salary,
• Dearness allowance, if the terms of service so provide,
• Commission based on fixed percentage of turnover achieved by the employee.

(##) Accumulated balance from a recognised provident fund will be exempt from tax if following conditions are satisfied :

1. If the employee has rendered a continuous service of 5 years or more. If accumulated balance includes amount transferred from other recognised provident fund, then the period for which the employee rendered service to such previous employer shall also be included in computing the aforesaid period of 5 years.
2. If the service of employee is terminated before the period of 5 years due to his ill health or discontinuation of business of the employer or other reasons beyond his control.
3. If on termination, the employee takes employment with any other employer and the balance becoming payable to him is transferred to his account in any recognised fund maintained by such other employer, then the amount so transferred will not be charged to tax.

(###) Treatment of payment received from un-recognised provident fund :
Payment on termination will include four components, viz, employee's contribution and interest thereon and employer's contribution and interest thereon. The tax treatment of such payments is as follows :

• Employee's contribution is not charged to tax; interest thereon is taxed under the head 'Income from other sources'.
• Employer's contribution as well as interest thereon will be taxable as salary income. However, relief under Section 89 will be available.

Payment from Superannuation Fund:

Approved superannuation fund means superannuation fund which is approved by the Commissioner of Income-tax. With effect from assessment year 2010-11, employer��s contribution to an approved superannuation fund in excess of Rs. 1,00,000 is charged to tax as perquisite.
Employee's contribution will qualify for deduction under section 80C and interest on accumulated balance is not liable to tax. Payments in following cases will be exempt from tax under section 10(13):

• Payment on death of beneficiary; or
• Payment to an employee in lieu of, or in commutation of an annuity on his retirement at or after the specified age or on his becoming incapable prior to such retirement; or
• Refund of contribution to an employee on leaving the service (otherwise than above mentioned reason) to the extent to which such payment does not exceed the contribution made prior to April 1, 1962.
• By way of refund of contributions on the death of a beneficiary.

Payments from New Pension Scheme

• As per section 80CCD, an individual who is employed by the Central Government/any other employer on or after January 1st, 2004 or a self employed assessee can claim deduction under section 80CCD in respect of contribution to NPS.
• Amount paid/deposited (during the previous year) in assessee's account, under NPS will qualify for deduction under section 80CCD.
• Amount of deduction will be as follows :
  1. Employee's contribution during the year to notified pension scheme, subject to condition that maximum of 10% of salary is deducted in the year in which contribution is made.
  2. Employer's contribution during the year to notified pension scheme is first included in the income of the assessee, and then such contribution, subject to maximum of 10% of salary, is deducted in the year in which contribution is made.
• On closure of aforesaid account or in case the employee opts out of the said scheme or on receipt of pension from the annuity plan, credit balance in such pension account for which deduction is claimed and accretion to such account is taxed in the hands of receiver in the year of receipt. If amount received on closure is used for purchasing an annuity plan in the same previous year, then such amount will be exempt from tax.
• If deduction in respect of above amount is claimed under section 80CCD, then deduction of the same amount cannot be claimed under section 80C.
• Aggregate deduction under sections 80C, 80CCC and 80CCD(1), (i.e., employee's contribution) cannot exceed Rs. 1,50,000.

Retirement Benefits

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State Govt. Pensioners  Pension Calculator Calculate your Pension, Gratuity & DR

� Pension � Commutation of Pension � Death-cum-retirement Gratuity � General Provident Fund and Incentives � Contributory Provident Fund � Leave Encashment � Central Government Employees Group Insurance Scheme (CGEGIS) � TA for settlement at a station after Retirement Click here for 5th Pay Commission Recommendations on retirement benefits. Click here for 6th Pay Commission Recommendations on retirement benefits. Click here for Medical Benefits for Retirees. Pension The minimum eligibility period for receipt of pension is 10 years. A Central Government servant retiring in accordance with the Pension Rules is entitled to receive superannuation pension on completion of at least 10 years of qualifying service. In the case of Family Pension the widow is eligible to receive pension on death of her spouse after completion of one year of continuous service or before even completion of one year if the Government servant had been examined by the appropriate Medical Authority and declared fit for Government service. W.e.f 1.1.2006, Pension is calculated with reference to average emoluments namely, the average of the basic pay drawn during the last 10 months of the service or last basic pay drawn whichever is beneficial. Full pension with 10/20 years of qualifying service is 50% of the average emoluments or last basic pay drawn whichever is beneficial. Before 1.1.2006, for qualifying service of less than 33 years, amount of pension was proportionate to the actual qualifying service broken into completed half-year periods. For example, if total qualifying service is 30 years and 4 months (i.e. 61 half-year periods), pension will be calculated as under:- Pension amount = R/2(X)61/66 where R represents average reckonable emoluments for last 10 months of qualifying service or the last pay drawn as opted by the govt servant. Minimum pension presently is Rs. 3500 per month. Maximum limit on pension is 50% of the highest pay in the Government of India (presently Rs. 45,000) per month. Pension is payable up to and including the date of death. Top Commutation of Pension A Central Government servant has an option to commute a portion of pension, not exceeding 40% of it, into a lump sum payment with effect from 1.1.1996. No medical examination is required if the option is exercised within one year of retirement. If the option is exercised after expiry of one year, he/she will have to under go medical examination by the specified competent authority. Lump sum payable is calculated with reference to the Commutation Table constructed on an actuarial basis.  The monthly pension will stand reduced by the portion commuted and the commuted portion will be restored on the expiry of 15 years from the date of receipt of the commuted value of pension. Dearness Relief, however, will continue to be calculated on the basis of the original pension (i.e. without reduction of commuted portion). The formula for arriving for commuted value of Pension (CVP) is CVP = 40 % (X) Commutation factor* (X)12 * The commutation factor will be with reference to age next birthday on the date on which commutation becomes absolute as per the New Table as Annexure to this Deptt's O.M. No. 38/37/08- P&PW(A) dated 2.9.2008 Top Death/Retirement Gratuity Retirement Gratuity This is payable to the retiring Government servant. A minimum of 5 years qualifying service and eligibility to receive service gratuity/pension is essential to get this one time lump sum benefit. Retirement gratuity is calculated @ 1/4th of a month�s Basic Pay plus Dearness Allowance drawn before retirement for each completed six monthly period of qualifying service. There is no minimum limit for the amount of gratuity. The retirement gratuity payable is 16� times the Basic Pay, subject to a maximum of Rs. 10 lakhs. Death Gratuity This is a one-time lump sum benefit payable to the widow/widower or the nominee of a permanent or a quasi-permanent or a temporary Government servant, including CPF beneficiaries, dying in harness. There is no stipulation in regard to any minimum length of service rendered by the deceased employee. Entitlement of death gratuity is regulated as under: Qualifying Service Rate Less than one year 2 times of basic pay One year or more but less than 5 years 6 times of basic pay 5 years or more but less than 20 years 12 times of basic pay 20 years of more Half of emoluments for every completed 6 monthly period of qualifying service subject to a maximum of 33 times of emoluments. Maximum amount of Death Gratuity admissible is Rs. 10 lakhs w.e.f. 1.1.2006 Service Gratuity A retiring Government servant will be entitled to receive service gratuity (and not pension) if total qualifying service is less than 10 years. Admissible amount is half month�s basic pay last drawn for each completed 6 monthly period of qualifying service. There is no minimum or maximum monetary limit on the quantum. This one time lump sum payment is distinct from and is paid over and above the retirement gratuity. Issue of No Demand Certificate Dues owed by the retiring employees on account of Licence Fee for Government accommodation, advances, over payment of pay and allowances are required to be assessed by the Head of Office and intimated to the Accounts Officer two months in advance of the date of retirement so that these are recovered from retirement gratuity before payment. For this purpose the Licence Fee for those in occupation of Government accommodation is taken into account up to the end of the permissible period for which accommodation can be retained after retirement under the Rules on normal rent. The recovery of Licence Fee beyond that period is the responsibility of the Directorate of Estates. If, for any reason final dues cannot be assessed on time, then 10% of gratuity is withheld from gratuity Top General Provident Fund and Incentives As per General Provident Fund (Central Services) Rules, 1960, all temporary Government servants after a continuous service of one year, all re-employed pensioners (Other than those eligible for admission to the Contributory Provident Fund) and all permanent Government servants are eligible to subscribe to the Fund. A subscriber, at the time of joining the fund is required to make a nomination, in the prescribed form, conferring on one or more persons the right to receive the amount that may stand to his credit in the fund in the event of his death, before that amount has become payable or having become payable has not been paid. A subscriber shall subscribe monthly to the Fund except during the period when he is under suspension. Subscriptions to the Provident Fund are stopped 3 months prior to the date of superannuation. Rates of subscription shall not be less than 6% of subscriber�s emoluments and not more than his total emoluments. Rate of interest on GPF accumulations with effect from 1.4.2009 is 8% compounded annually and the rate of interest will vary according to notifications of the Government. The Rules provide for drawal of advances/ withdrawals from the Fund for specific purposes. Deposit Linked Insurance Revised Scheme Under the GPF Rules, on the death of subscriber, the person entitled to receive the amount standing to the credit of the subscriber shall be paid an additional amount equal to the average balance in the account during the 3 years immediately preceding the death of the subscriber subject to certain conditions provided in the relevant Rule. The additional amount payable under that Rule shall not exceed Rs. 60,000/-. To get this benefit, the subscriber should have put in at least 5 years service at the time of his/her death. Top Contributory Provident Fund The Contributory Provident Fund Rules (India), ,1962 are applicable to every non-pensionable servant of the Government belonging to any of the services under the control of the President. A subscriber, at the time of joining the Fund is required to make a nomination in the prescribed Form conferring on one or more persons the right to receive the amount that may stand to his credit in the Fund in the event of his death, before that amount has become payable or having become payable has not been paid. A subscriber shall subscribe monthly to the Fund when on duty or Foreign Service but not during the period of suspension. Rates of subscription shall not be less than 10% of the emoluments and not more than his emoluments. The employer�s contribution at that percentage prescribed by the Government will be credited to the subscriber�s account and this is 10%. Rate of interest with effect from 1.4.2009 is 8% compounded annually. The Rules provide for drawal of advances/ withdrawals from the CPF for specific purposes. As in GPF Rules, the CPF Rules also provide for Deposit Linked Insurance Revised Scheme. Top Leave Encashment Encashment of leave is a benefit granted under the CCS (Leave) Rules and not a pensionary benefit. Encashment of Earned Leave/Half Pay Leave standing at the credit of the retiring Government servant is admissible on the date of retirement subject to a maximum of 300 days. There is no provision under the Rule for payment of interest on delayed payment of Leave Encashment. Top Central Government Employees Group Insurance Scheme A portion of monthly contributions paid while in service is credited in a Saving Fund, on which interest accrues. A Government servant while entering service has to apply in Form No. 4 of the above Scheme to the Head of Office, who shall issue a sanction for the payment of subscriber�s accumulation in the Savings Fund segment together with interest and arrange for its disbursement, soon after retirement. Payments under this Scheme are made in accordance with the Table of Benefit which takes in to account interest up to the date of cessation of service. Insurance cover benefit under this Scheme is available to the family in the event of death of the subscriber. No interest is payable on account of delayed payments under this Scheme. Top

No Reservation in Promotion – Supreme Court..

PROJECTED PAY STRUCTURE FOR 7TH PAY COMMISSION

Union Budget 2012-13: Income tax exemption limit raised to Rs 2 lakh

NEW DELHI: Disappointing a large section of income tax payers in the country, finance minister Pranab Mukherjee made a small raise in the exemption limit in his Budget speech.
Pranab Mukherjee raised the exemption limit for income tax by just Rs 20,000 from Rs 1,80000 to Rs 2 lakh.

The new tax slabs are as follows:

Up to Rs 2 lakh: No tax

From Rs 2 lakh to 5 lakh: 10%

From Rs 5 lakh to 10 lakh: 20%

Above Rs 10 lakh: 30%


The exemption limit for the senior citizens between 60 and 80 years of age will be Rs 2.50 lakh; 10 per cent will be levied on income between Rs 2.5-5 lakh, 20 per cent between Rs 5-10 lakh and 30 per cent above Rs 10 lakh.

For very senior citizens (80 years and above), the income tax exemption limit will be Rs 5 lakh; 20 per cent will be levied on income between Rs 5-10 lakh and 30 per cent for above Rs 10 lakh.