LIC will no more useful for Income Tax Rebate in near future due to New Tax Code- 2011

LIFE INSURANCE POLICY AND NEW DIRECT TAX CODE

In India, nearly two-thirds of all new life insurance policies are sold during the six months between September and March — an indicator that life insurance is bought primarily for tax saving. However, the New Direct Taxes Code, slated to be implemented from April 2011, proposes to do away with the disproportionate tax advantage that life insurance products have so far been enjoying over other savings instruments. The proposals of the direct tax code are still open for debate and discussions, but the underlying policy directions indicate that life insurance will be the most affected among all other investment instruments. This may affect your financial planning if you don't understand the implications and plan your insurance buying accordingly.

PREMIUM PUNCH

At present, premium payment for a life insurance policy is tax-exempt provided the premium amount is not more than 20 per cent of the sum assured. Similarly, any sum received under a life insurance policy — be it money back at regular intervals, death benefit, maturity benefits, including bonus and loyalty additions — is tax-free. But the new tax code envisages that any sum received under a life insurance policy, including death benefit, will be exempt from tax if and only if the premium paid for any of the years does not exceed 5 per cent of the sum assured. This provision, if it finds its way into the final bill, will prove the most significant because the premium installments of all life insurance policies, be it a traditional plan or a unit-liked one, as a percentage of sum assured is much higher than 5 per cent, except in the case of term assurance plans. In other words, benefits under all life insurance policies (except for term assurance) will become taxable from April 2011 unless insurers drastically reduce their premium rates to comply with the 5 per cent criteria. In other words, the sum assured of a policy should be at least 20 times of the annual premium — if you pay an annual premium of Rs 15,000 for a policy, the minimum sum assured should be Rs 3 lakh — to receive tax-free benefits from a life insurance policy. At present, insurance companies offer a minimum sum assured of only five times the annual premium — for an annual premium of Rs 15,000, you get a life cover of Rs 75,000.

POLICYHOLDERS’ LOSS

Now, if life insurance products with their current features have to comply with the requirement for tax exemption under the direct tax code, the mortality charge payable by policyholders will increase four times (since the minimum sum assured will have to be increased four times). An increase of mortality charge will surely reduce the ultimate return to policyholders. Little wonder why life insurers lobbied and were successful in persuading the Insurance Regulatory and Development Authority (IRDA) to exclude mortality charges when the regulator put a cap on various charges under unit-linked plans — the largest selling product in the life insurance space. Had the mortality charge been included in the overall cap on ULIP charges, insurers would not have any other way but to reduce the commission payable to agents in order to provide for higher sum assured to policyholders. Now that mortality charges are excluded from overall cap on ULIP charges, it is only the policyholder who will have to pay a higher cost and sacrifice return.

TAXING TIMES

What we have discussed so far is only one aspect of the fallout of the new tax regime on life insurance. The New Direct Taxes Code has another bearing on life insurance policies. Under the new tax regime, premium payment up to Rs 3 lakh for a life insurance policy will be tax-exempt. But if the sum assured is not equal to or higher than 20 times the annual premium, any sum received under the policy will be taxed at the marginal rate applicable to the income bracket taking into account the benefits received.

For example, you have bought a policy having a sum assured of Rs 10 lakh and on maturity it amounted to Rs 30 lakh. Let us assume that your annual income at the time of the policy maturity is Rs 10 lakh. So, for income tax purposes, your total income would be considered as Rs 40 lakh (= Rs 10 lakh + Rs 30 lakh) and you shall have to pay income tax on the entire sum at the rate corresponding to the Rs 40-lakh income bracket. Let us now see what it actually means.

For this we consider two separate tax regimes — one is taxed-exempt-exempt and the other is exempt-exempt-taxed. Under taxed-exempt-exempt, you invest tax-paid income while the accumulation on the invested amount and its withdrawal are exempt from tax. Under exempt-exempt-taxed, your income is not taxed initially neither the accumulation on the invested amount. You pay tax on the withdrawal amount. .Till the rate of tax remains the same there is no financial difference whether it is TEE or EET regime. But if the tax rate is a progressive one, that is, the tax rate increases with the level of income, EET will yield much lower post-tax return than in TEE.Given the proposed tax slabs in the New Direct Taxes Code, you may have to pay a much higher tax on benefits received under a life insurance policy than a 10 per cent capital gains tax on investment in other instruments

Read more: http://www.simpletaxindia.org

HIGHLIGHTS OF "MODIFIED ASSURED CAREER PROGRESSION SCHEME” (MACPS)

GOVERNMENT OF INDIA

MINISTRY OF RAILWAYS

(RAILWAY BOARD)

S.No.PC-VI/110 RBE No.101 /2009

No. PC-V/2009/ACP/2                 New Delhi, dated 10 .06.2009

The General Managers

All Indian Railways & PUs

(As per mailing list)

Sub: Recommendations of the Sixth Central Pay Commission – Modified Assured Career Progression Scheme (MACPS) for Railway Employees

Download MACP

1. Scheme would be known as "MODIFIED ASSURED CAREER PROGRESSION SCHEME” (MACPS) FOR THE CENTRAL GOVERNMENT CIVILIAN EMPLOYEES.

2. The Scheme comes into effect from 1.9.2008 & is in supersession of previous ACP Scheme.

3. Three financial up-gradations shall be given from the direct entry grade on completion of 10, 20 and 30 years’ service respectively.

4. Financial up-gradation will be given in the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay, not as per the hierarchy available in the cadre.

5. Benefit of pay fixation available at the time of regular promotion shall also be allowed at the time of financial up-gradation under the Scheme. (3% increment plus difference in the Grade pay).

6. Promotions earned / up-gradation granted under ACP Scheme in the past to those grades which now carry the same grade pay due to merger of pay scales / up-gradations of posts recommended by the Sixth Pay Commission shall be ignored for the purpose of granting up-gradations under Modified ACPS.

7. The grade pay of Rs. 5400 in PB-2 and Rs.5400 in PB-3 shall be treated as separate grade pays for the purpose of grant of up-gradations under MACP Scheme.

8. 'Regular service' for the purposes of the MACPS shall commence from the date of joining of a post in direct entry grade on a regular basis either on direct recruitment basis or on absorption/re-employment.

a) Screening will be done for grant financial up-gradation under MACP.

b) Benchmark of 'good' would be applicable till the grade pay of Rs. 6600/- in PB-3.

c) Screening Committees shall be formed by the respective departments / Cadre Controlling authority.

d) Screening Committee will take up in first week of January the financial up-gradation cases maturing during the first-half (April- September). Similarly the Screening committee will take up in first week of July the financial up-gradation cases maturing during the second-half (October- March)

e) Cadre Controlling Authorities shall constitute the first Screening committee within a month from the date of issue of these instructions to consider the cases maturing up-to 30th June, 2009 for grant of benefits under the MACPS.

9. Financial up-gradation would be on non-functional basis subject to fitness, in the hierarchy of grade pay within the PB-1.Thereafter for up-gradation under the MACPS the benchmark of 'good' would be applicable till the grade pay of Rs. 6600/- in PB-3.

10. Illustration

1. Recruitment in Rs. 4200 GP – with no promotion for 10 years

 1^st Financial up-gradation after 10 years with GP - Rs. 4600.

 2^nd Financial up-gradation after (10+10) 20 years with GP - Rs. 4800.

 3^rd Financial up-gradation after (10+10+10) 30 years with GP - Rs. 5400.

11. Illustration 2.  Recruitment in Rs. 4200 GP – with 1^st promotion in 5 years with GP - Rs. 4600.

 2^nd Financial up-gradation after (5+10) 15 years with GP - Rs. 4800.

 3^rd Financial up-gradation after (5+10+10) 25 years with GP - Rs. 5400.

12. Illustration 3.  Recruitment in Rs.4200 GP - 1^st promotion in 5 years with GP - Rs. 4600.

 2^nd promotion after 8 years, (5+8=13 years) GP, Rs.4800.

 3^rd Financial up-gradation after (5+8+10) 23 years, GP, Rs.5400.

Central employees may get at least 8% D.A. hike from January 2010

As per AICPI assumed 35% D.A. to Central employees may get from January 2010

As per the figures available from Labour Bureau, Government of India it can be assumed that minimum of 8% DA hike is expected from January 2010, totalling 35% from current 27%. This is calculated assuming that the All India Consumer Price Index (AICPI) remains unchanged for November and December, which are yet to be announced.

Month	Year	Base Year 2001=100	Total	Average	App. DA	DA
May	2008	139	1613	–	–	–
June	2008	140	1623	135.25	16.84	16
July	2008	143	1634	–	–	–
August	2008	143	1634	–	–	–
Sep	2008	146	1659	–	–	–
Oct	2008	148	1673	–	–	–
Nov	2008	148	1687	–	–	–
Dec	2008	147	1700	141.67	22.38	22
Jan	2009	148	1714	–	–	–
Feb	2009	149	1728	–	–	–
Mar	2009	148	1739	–	–	–
Apr	2009	150	1751	–	–	–
May	2009	151	1763	–	–	–
June	2009	153	1776	148	27.85	27
July	2009	160	1793	–	–	–
August	2009	162	1812	–	–	–
Sep	2009	163	1829	–	–	–
Oct	2009	165	1846	–	–	–
Nov	2009	165 [Not available now, Assumption]	1863	–	–	–
Dec	2009	165 [Not available now, Assumption]	1881	153.75	35.40	35 [Calculated]

Source : Labour Bureau [Upto the month of Oct'09]

LTC to Central Govt employees : Travel by tour packages operated by IRCTC

Indian Railway Catering and Tourism Corporation (IRCTC), a Government of India's undertaking under the Min.of Railways for the purpose of reimbursement of LTC by Government servants on the lines of ITDCISTDC and to say that as the IRCTC is also offering tour packages involving air travel in the sectors like Delhi - Leh, Delhi - Srinagar, Jaipur -Goa,Chennai/Calcutta - Port Blair etc., the question of allowing LTC packages of IRCTC, including the component of air travel has been examined in consultation with the Min. of Finance.
It has now been decided to allow the re-imbursement of air fare along with
rail and road fare in the case of LTC journey 'of Government servants
in tours offered by IRCTC for reimbursement under LTC provided the IRCTC
indicates and certifies the 3 components separately and booking of tickets is done by IRCTC fully complying with the instructions of Govt. of lndia issued from time to time in this regard such as journey by Air lndia under LTC 80 scheme in economy class without package benefits etc.

-------------------------------------------------------

 

NO. 3101 11612002-Estt.(A)
Government of lndia
Ministry of Personnel, Public Grievances and Pensions
(Department of Personnel and Training)
North Block,
New Delhi,
Dated the 2nd December. 2009.
OFFICE MEMORANDUM
Subject : LTC to Central Government Employees -Travel by tour packages
operated by IRCTC.
The undersigned is directed to refer to DOP&T O.M. of even number dated
14.3.08, allowing tours by road conducted by the Indian Railway Catering and
Tourism Corporation (IRCTC), a Government of India's undertaking under the Min.
of Railways for the purpose of reimbursement of LTC by Government servants on
the lines of ITDCISTDC and to say that as the IRCTC is also offering tour packages
involving air travel in the sectors like Delhi - Leh, Delhi - Srinagar, Jaipur -Goa,
ChennailCalcutta - Port Blair etc., the question of allowing LTC packages of IRCTC,
including the component of air travel has been examined in consultation with the
Min. of Finance.
2. It has now been decided to allow the re-imbursement of air fare along with
rail and road fare in the case of LTC journey 'of Government servants
in tours offered by IRCTC for reimbursement under LTC provided the IRCTC
indicates and certifies the 3 components separately and booking of tickets is done
by IRCTC fully complying with the instructions of Govt. of lndia issued from time to
time in this regard such as journey by Air lndia under LTC 80 scheme in economy
class without package benefits etc.
(P. ~rabhakaren)
Deputy Secretary to the Govt. of lndia
Copy t0:-
President's Secretariat, Rashtrapati Bhavan, New Delhi
Vice-President's Secretariat, New Delhi.
Prime Minister's Office, South Block, New Delhi
Cabinet Secretariat, New Delhi.
Comptroller and Auditor General, New Delhi.
Central Vigilance Commission, New Delhi.
Union Public Service Commission, New Delhi.
Staff Selection Commission.
Central Bureau of Investigation.
All Union Territory Administrations.
11. Lok Sabha SecretariatlRajya Sabha Secretariat.
12. All attached and Subordinate Offices of the Min. of Personnel, Public
Grievances and Pension.
13. All Officers and Administrative Sections in the Ministry of Personnel, Public
Grievances and Pensions and Ministry of Home Affairs.
14.. .,'website Section, Ministry of Personnel, Public Grievances and Pensions,
" ' North Block, New Delhi.
15. Facilitation Centre, Min. of Personnel, Public Grievances and Pensions,
North Block, New Delhi - 25 spare copies.
16. 100 spare copies.

“Disagreement Note” must be communicated by the DA, to the CE along with EO’s Finding report of Inquiry

R.B.E. No. 33/1996

Subject: Rule 10 of Railway Servant (Discipline & Appeal) Rules, 1968 — Supply of Copy of the Inquiry Report to the charged railway servant before final orders are passed by the disciplinary authority.

[No. E (D&A) 87 RG 6-151, dated 04.04.1996]

Attention is invited to Board's letter of even No. dated 10.11.1989 on the above subject, wherein it had been prescribed that in all cases, where an inquiry has been held in accordance with the provisions of Rule 9 of Railway Servants (Discipline & Appeal) Rules, 1968, the disciplinary authority, if it is different from the Inquiring authority shall, before making a final order in the case, forward a copy of the Inquiry report to the railway servant concerned, requiring him to submit, within 15 days, his representation if any, on the report of the inquiry authority.

2. It was also prescribed that in cases where the disciplinary authority proposes to disagree with the findings of the Inquiry Officer, it would not be necessary for the disciplinary authority to come to any tentative conclusions about its findings before forwarding a copy of the Inquiry report, and that, the reasons of disagreement with the findings of the Inquiry Officer may be communicated in the final order of punishment.

3. It was also stated that the said instructions would be reviewed after the final decision of the Supreme Court in the matter. The Supreme Court has since decided the matter in the judgement dated 01.10.1993 in the case of Managing Director (ECIL), Hyderabad v. B. Karunakar (JT 1993(6) SC-I) and it has been held that wherever the Service Rules contemplate an inquiry before a punishment is awarded and when the inquiry officer is not the disciplinary authority, the delinquent employee will have a right to receive the Inquiry Officer's report notwithstanding the nature of the punishment.

4. The matter has been considered in consultation with the Department of Personnel and it has been decided that where an inquiry has been held, in accordance with the provisions of Rule 9 of Railway Servants (Discipline & Appeal) Rules, 1968, the disciplinary authority, before making a final order in the case, shall forward a copy of the report of the inquiry held by the disciplinary authority or where the disciplinary authority is not the inquiring authority, a copy of the report of the inquiring authority to the charged railway servant, who shall be required to submit, if he so desire, his written representation or submission to the disciplinary authority within 15 days, irrespective of whether the report is favourable or not to the charged railway servant. Thus a copy of the Inquiry Report is to be sent to the charged official irrespective of whether the inquiry is conducted by the Disciplinary Authority himself or by a nominated inquiring authority.

5. It has also been decided that where the Inquiring Authority holds a charge as not provided and the disciplinary authority takes a contrary view, the reasons for such disagreement must be communicated, in brief, to the charged employee along with the report of Inquiry so that the charged officer can make an effective representation. This procedure would require the Disciplinary Authority to first examine the report as per the laid down procedure and formulate its tentative views before forwarding the Report of Inquiry to the Charged Officer.

6. The instructions in the preceding paragraphs will operate prospectively from the date of issue of this letter and accordingly will apply only in cases where the disciplinary authority is yet to forward a copy of the Report of Inquiry to the charged railway servant.

7. The above instructions may be immediately brought to the notice of all concerned for compliance.