Tuesday, December 27, 2011
The Direct Tax Code (DTC) is in the offing. The bill for this new income tax statue might be introduced in the parliament this winter. Once DTC is in place the income tax act and rules will no longer exist.
It is perceived that the proposed new Direct Taxes Code Bill 2010, if implemented in the proposed form, will be detrimental to the interests of individual policy-holders in insurance companies.
Under the proposed DTC Bill 2010, deduction for payment towards a typical life insurance cover is allowed if the premium paid in any of the years during the policy term does not exceed 5 per cent of the capital sum assured under the policy.
This proposed cap of 5 per cent will deny benefits to large number of policyholders. For an individual aged 30, the minimum term will be around 21- 22 years and for 40 years and above, the term will be 28 years or more.
This will lead to inequity, as for the same term and sum assured, the tax exemption would be available to, say, a 30-year-old person, but not to 40-year-ld person because of higher term insurance content.
Thus, a policyholder of higher age will be forced to pay premiums beyond his working age.
To ensure that life insurance products are long term, there is a minimum lock-in period of five years. The IRDA, in its recommendation to the CBDT, has suggested that only those policies should be allowed for deductions which have a minimum maturity period of 10 years.
Hence, it will be prudent to revise the minimum term of policies to 10 years irrespective of the frequency of premium paid during the term.
In DTC Bill 2010, a separate window of a much lower amount of Rs 50,000 has been prescribed for life insurance premiums, tuition fees and health insurance premiums.
With increasing costs of education and health care services, much of this small limit would be utilised, leaving little space for life insurance premium. Thus, this shared allocation, actually tries to further undermine the importance of life insurance as an asset class and deprive the benefit of social security to the policyholders.
However, the proposed Bill provides a total exemption up to Rs 1 lakh for investments in long-term savings such as Employees’ Provident Fund (EPF), Public Provident Fund (PPF) and New Pension System (NPS) with no prescribed minimum holding period for investment in these instruments.
It will be desirable to provide a limit of Rs 1,00,000 for life insurance premiums/annuities too.
Also, there are now approximately 31 crores of in-force policies and the persons holding these policies would be substantially affected if the proposed Bill is implemented in its current form, since DTC Bill 2010 does not specify grandfathering of existing policies.
Under the current tax regime, Section 80CCC of the Income-Tax Act 1961 provides for deduction in respect of premiums paid under IRDA approved pension fund/annuity plan. This deduction is allowed up to the aggregate limit of Rs 100,000, considering deduction under Section 80C as well.
However, under the proposed tax regime (DTC), only that amount received under NPS, which is used to buy an annuity plan, will not be taxable in the year of such receipt.
Similar provision needs to be inserted for annuity received by the policyholder from a life insurance company so as to bring parity in long term saving products.
One does get a feeling that the thinkers in the tax planning divisions feel that long-term savings through life insurance is less important for the economy than savings through Employee Provident fund, Public Provident fund and the New Pension Scheme, with the latter being benefited through fiscal incentives.
Source: The Hindu Businessline
Friday, December 23, 2011
Proposed New Health Insurance Scheme for CG Employees discussed in Parliament
Government on Friday said it was contemplating introduction of a health insurance scheme for central government employees and pensioners on a pan India basis.
In reply to a question in Lok Sabha, Health Minister Ghulam Nabi Azad said the scheme would be an alternative to the existing CGHS scheme.
“The proposal is to make this scheme voluntary and contributory for serving employees and pensioners. However, it is proposed to be made compulsory for new entrants in Government service,” Azad said.
source: Zee News
Monday, December 19, 2011
Saturday, December 17, 2011
Tuesday, December 13, 2011
Secretary General and Vice President (North) persuaded the three following issues in New Delhi:
· Anomaly of senior drawing less pay than juniors arising out of fixation of pay after revision of grade pay from 4200/- to 4600/-,
· Progress of Cadre Review,
· Renewal of recognition.
The first point was discussed with different Board officials, Expenditure Ministry & Dy. Secy. D.O.P&T; it was understood that the first part in relation to senior drawing less pay than juniors arising out of fixation of pay after revision of grade pay from 4200/- to 4600/- is fixed now and for the manner of fixation part i.e. grant of one additional increment to all those Inspectors who got promotions or recruited before 01.01.2006, Expenditure referred the file to D. O. P. & T. Board could not issue the order as the two issues are processed through a single note. It was assured to us that the Board would be issuing the letter immediately after getting the file from D.O.P&T. Hence the confusion regarding fixation of pay at the minimum of 17140/- is cleared and would be effected shortly.
The delegation met Joint Secy. (D.O.P&T) Sh. Rajeev Kapoor & different officials inclusive of Sh. Anant Kumar to get a clear Idea about the proposal and progress. It was understood that the file is with Deputy Secretary (D.O.P&T), they are examining the CR proposal especially for HAG scale; it was further intimated to the delegation that D.O.P&T is not only sympathetic but also trying to find out some solution on the acute stagnation of Inspectors & Superintendents. Till now there was no trace of curtailment of A.C. posts, discussions are on regarding one time relaxation for filling up of the posts arising out of CR through promotions only. It was assured to us that D.O.P&T shall complete its scrutiny within a fortnight from now and shall send it to Cadre Review Group within the DOPT. Once it was accepted by Cadre Review Group the rest is the implementation part.Except Mumbai we have received DDO certificates from almost all parts of this country, in Mumbai at least more than 1100 members are deducting membership fees from salary for lack of supervision these DDO certificates and the contributions are not reaching to the Association. Members of Mumbai are requested to deposit the cheque in the Association Bank Account available in this blog. Once again we are able to submit more than 35% DDO certificates to Board for renewal of recognition. All the units are once again requested to submit their All India contribution forthwith as Association is struggling with lack of fund.
Sunday, December 11, 2011
New Delhi: For the second time in last three months, central excise collections slipped into negative terrain, raising concerns of the government missing the indirect tax target for the year. During April-November, the collections were estimated at Rs.2.52 lakh crore, which is 63 % of the budget estimates for 2011-12.
Central Board of Excise and Customs (CBEC) chairman S K Goel said that the latest figures have raised concern about meeting the revised target of Rs.4 lakh crore.
He said in November, collection were Rs.11,761 crore, 6.5% lower than the corresponding period last year when it was Rs.12,574 crore.
During April-November collection rose by of 9% to Rs.94,441 crore. However, the drop in November was mainly on account of a reduction in taxes on petroleum products and fewer clearances, Goel said.
The total indirect tax collections rose 16.8% during the first eight months of the current fiscal to Rs.2,52,544 crore. "There has been a fall in central excise, which is a matter of concern. I have called a meeting of senior officials to discuss why central excise is showing negative growth," the CBEC chairman told reporters.
Source: Times Of India - 10-12-2011
Thursday, December 1, 2011
In the Cadre Restructure Proposal furnished to DOPT, the Central Board of Excise and Customs (CBEC) has sought for 25,000 more employees, equivalent to 40% of its current staffing level, to meet the growing workload.
CBEC is the backbone of Finance Ministry. It administrate the indirect tax policy and collects more than Rs 3.50 lakh crore in a financial year. This revenue is generated on the levy and collection of customs duties, central excise duties and service tax. Apart from the duty to curb goods smuggled to evade payment of customs duties the officers of Customs and Central Excise are also entrusted with the work of prevention of Drug Trafficking.
It is suggested by CBEC that it requires more staff strength to cater to increasing imports, exports, number of passengers in and out of the country. As far as Central Excise and Service Taxes are concerned the growing indutrial production and inclusion of more services in the tax net are main reasons for this proposal for cadre restructure.
The existing strength of 67,000 in CBEC has been proposed to increased 92,000. As per reliable reports, the finance ministry has already allowed it to increase junior staff, but the approval of the department of personnel and training (DoPT) is required to increase the number of officers at senior level.
It is told, CBEC has requested for a 170% increase in our group A level officers (Assistant commissioners and above) and around a 45% increase in group B level executive cadre officers (Inspectors and Superintendents).
Last CBEC cadre restructure was implemented in the year 2002, while this exercise is due after every fiver years.
CBEC has around 2,400 group A level officers and 34,000 group B level officers. In its proposal, it has asked DoPT to create 4,250 additional posts in Group ‘A’ level.
Live Mint reports on Cadre Structure in CBEC as follows
“We do not want to disturb the equilibrium in group A, where more than 50% officers come as direct recruits through UPSC (Union Public Service Commission) and the rest are promoted from group B,” the second official said. “If we give such large (number of) posts, chances are that more group B employees will get promotion and their numbers would be higher than direct recruits. So we are struggling to find the right balance”UPSC conducts examinations to recruit bureaucrats.The finance ministry official said the proposed increase in group A level officers will improve their ratio with group B level officers. “Group B officers are stagnating. They are not getting promotions as compared with peers,” he said.CBEC also plans to improve training methods for lower-level staff and increase ministry-level staff to around 15,000 from 12,000, Sepoy and hawaldars (constables) to 16,400 from 12,600 and stenographers to around 4,500 from 1,600.Source: Live Mint & gconnect