• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Home
  • DOPT ORDERS 2020
  • FinMin Orders 2020
  • Railway Orders 2020
  • Contact Us

7th Pay Commission Latest news

Central Government Employees News

  • DOPPW Orders
  • 7th Pay Commission
  • Dearness Allowance
  • Dearness Relief
  • CSD Price List
  • Defence
    • Defence Pension
You are here: Home / 7th Pay Commission / Innovative Proposal : Part of Seventh Pay Commission salary increase could be by way of bonds.

Innovative Proposal : Part of Seventh Pay Commission salary increase could be by way of bonds.

April 8, 2016 pcadmin Leave a Comment

Part of Seventh Pay Commission salary increase could be by way of bonds.

Innovative approach: Government staff’s pay hikes may fund bank capitalisation

The government is considering an innovative proposal under which 50% of increased salary of higher-income government staff under the Seventh Pay Commission will be compulsorily invested in bank capitalisation bonds. The proceeds will be used to recapitalise banks without additional pressure on the fiscal.

While this will result in less cash in the hands of higher-income employees, as a sweetener they will get income tax rebate on the amount invested. Those wanting to invest more than 50% to save tax will be allowed to do so. The Bank Recapitalisation Scheme, as this proposal is being called, will be voluntary for employees with lower salaries (those in the Rs 5,200-20,200 bracket) and pensioners.

A finance ministry official confirmed that preliminary discussions around this proposal were held at a meeting on Thursday, but no decision on its implementation was taken. “The issue was discussed. We are looking at all options,” he said.

“The proposal entails that through a provision under Income Tax Act, tax rebate should be offered to all employees receiving extra salary income through pay commission in the year 2016-17 and 2017-18, provided the money is invested in this Bank Recapitalisation Scheme,” added the official.

The government will have to additionally shell out Rs 40,000-50,000 crore annually on account of implementation of the seventh pay commission recommendations with effect from January 1, 2016. If this proposal is accepted, a portion of this money will be used to capitalise banks. According to finance ministry estimates, state-run banks will require Rs 1.8 lakh crore of additional capital in the next four financial years, of which Rs 70,000 crore will be provided by the government.

The government has budgeted Rs 25,000 crore for bank capitalisation in the current fiscal. While the government has said it has made adequate provision in the Budget to cover the extra spending on account of the pay commission recommendations, analysts reckon it is not adequate and full implementation of award will make it difficult to achieve the fiscal deficit target of 3.5% of GDP.

“Increase in government employee wages and pension expenditure on account of seventh pay commission recommendations is not fully provided for in the Budget,” Morgan Stanley had said in a report.

The proposal currently under consideration gives the government the leeway to meet both its pay commission and bank capitalisation commitments without putting the fiscal deficit target under threat. Bonds will provide the exchequer some wriggle room. The payment will become due when bonds mature, leaving the government with only the interest payment liability in the current fiscal.

The flip side is that the proposed scheme could annoy government employees expecting a greater take-home pay. Hence the scheme has a tax exemption lollipop.

A second government official said this amount will be used to recapitalise banks through a special bank capitalisation fund that will invest in perpetual non-redeemable preference shares issued by banks. Banks will pay 5.1% dividend that is also proposed to be exempted from the dividend distribution tax. The fund will in turn pay 5% interest to government employees, retaining 0.1% as administrative charge.

“This interest income will also be tax free for government employees,” he said, which will increase the effective yield. The government will eventually pay back the amount in four equal investments after 8, 9, 10 and 11years, spreading the fiscal burden of repayment over that period. It will guarantee payment of 5% interest and repayment of deposits irrespective of whether the banks pay the dividend or not, the official added.

Source : Economic Times

Filed Under: 7th Pay Commission, 7th Pay Commission News

Also Read

Amendment in the Central Civil Services Leave Rules 1972

Amendment in the Central Civil Services Leave Rules 1972

May 26, 2023 By pcadmin Leave a Comment

Amendment in the Central Civil Services Leave Rules 1972 MINISTRY OF PERSONNEL, PUBLIC GRIEVANCES AND PENSIONSDEPARTMENT OF PERSONNEL AND TRAININGNOTIFICATION New Delhi, the 15th May, 2023 GSR. 374(E).-In exercise of the powers conferred by proviso to article 309 read wit clause (5) of … [Read More...] about Amendment in the Central Civil Services Leave Rules 1972

Punctuality in attendance in Government offices

Punctuality in attendance in Government offices

May 23, 2023 By pcadmin Leave a Comment

Punctuality in attendance in Government offices GOVERNMENT OF WEST BENGALFinance DepartmentNABANNA325, Sarat Chatterjee Road, Howrah-711102 No. 3370 -F(P2) Dated, Howrah, the 20th May, 2023 M E M O R A N D U M Sub : Punctuality in attendance in Government offices In order to … [Read More...] about Punctuality in attendance in Government offices

Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund

Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund

May 23, 2023 By pcadmin Leave a Comment

Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund Government of West BengalFinance DepartmentGroup-J Memo No: 027-F (J) WB Date: 04/05/2023 MEMORANDUM Subject:- Ceiling of Rs. 5 Lakh on subscription in General Provident Fund (West Bengal Services) in a financial … [Read More...] about Ceiling of Rs. 5 Lakh on Subscription in General Provident Fund

GISS, 1987 – Table of Benefits upto July, 2023

GISS, 1987 – Table of Benefits upto July, 2023

May 23, 2023 By pcadmin Leave a Comment

GISS, 1987 – Table of Benefits upto July, 2023 GOVERNMENT OF WEST BENGALFINANCE DEPARTMENTAUDIT BRANCH No. 031-F(J) W.B. Date: 11.05.2023 MEMORANDUM SUBJECT: State Government Employees Group Insurance Scheme, 1987 – Table of Benefits under Savings Fund for the year of cessation of … [Read More...] about GISS, 1987 – Table of Benefits upto July, 2023

Disbursement of Railway Pension through Private Sector Banks

Disbursement of Railway Pension through Private Sector Banks

May 23, 2023 By pcadmin Leave a Comment

Disbursement of Railway Pension through Private Sector Banks Government of IndiaMinistry of RailwaysRailway Board RBA No. 16/2023 No. 2010/AC-II/21/10/Pt IV New Delhi, dated 15.5.2023 Pr.Financial Advisors,All Zonal Railways & PUS Pr. Chief Personnel Officers,All Zonal Railways … [Read More...] about Disbursement of Railway Pension through Private Sector Banks

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

All About Pension

All about Pension

Latest DOPT Orders

Grant of fund for modernisation of Non-Statutory Departmental Canteen located in Central Government Offices

General Election 2023: Grant of Paid holiday on day of Poll for General Election in Karnataka, 2023

Reimbursement of Children Education Allowance (CEA) to Central Government servants having Divyang Children

Addendum for early closure of all the offices falling in the premises of Parliament House & Rashtrapati Bhawan in c/w forthcoming Republic Day

Early Closure of Offices in connection with Republic Day Parade/Beating Retreat Ceremony/At Home Function during January, 2023

Latest Finmin Orders

CGEGIS 1980 – Tables of Benefits for the savings fund for the period from 01.04.2023 to 30.06.2023.

Dearness Allowance to Central Government employees effective from 01.01.2023 – FINMIN Order

Compendium of Instructions regarding grant of House Rent Allowance to Central Government employees – FINMIN

CGEGIS 1980: Table of Benefits of saving funds from Oct to Dec 2022

Non-Productivity Linked Bonus (ad-hoc bonus) to Central Government Employees for 2021-22

Latest Railway Orders

Disbursement of Railway Pension through Private Sector Banks

Dearness Relief to Railway pensioners from Jan 2023

State Railway Provident Fund Interest Rate from April 2023 to June 2023

Timely verification of Caste/Community Certificates – Railway Board Order

Timelines for completion of APAR to Railway Employees for 2022-23

Categories

Copyright © 2023