7th Pay Commission: New Allowances To Come Under Tax

New Delhi: A Senior Finance Ministry official said tax will be imposed on the New allowances of central government employees under 7th Pay Commission recommendations.

“The Finance Bill 2016 proposes tax treatment on basic salary, bonus and allowances etc for both government and non-government salaried employees.”

“If all allowances excluding basic salary of government employees are made tax free which will shows discrimination to others,” he said.

The central government employees unions demanded at last Thursday’s meeting of ‘Committee on Allowances’ that all new allowances should be tax exempt.

The government had set up the ‘Committee on Allowances’ under the chairmanship Finance Secretary on July 22 for examination of the recommendations of 7th Pay Commission on allowances other than dearness allowance because the pay commission had recommended abolition of 51 allowances and subsuming 37 others after examining 196 allowances.

The government implemented the new pay structure from January, 2016 for central government employees excluding allowances, the compensatory perks for all employees, which will be implemented after the ‘Committee on Allowances’ submitting its report.

The unions demanded for implementation of the allowances with retrospective effect from January 2016. However, there is a usual practice to pay the allowances from the date of implementation.

The officer also informed our reporter that the allowances of government employees will increase soon.

Keeping salaries and allowances hikes in mind, the Finance Minister Arun Jaitley has allocated Rs 1.02 lakh crore in the Union budget for paying the central government employees.

With the increase in allowances deferred the burden on the exchequer will be Rs 72,800 crore on account of salaries and pensions and over Rs 12,000 crore on account of arrears, aggregating Rs 84,933 crore during 2016-17.

The committee is likely to propose higher allowances than the allowances recommended by the 7th Pay Commission and ready to submit its proposal within 10-15 days.

The government plans to implement the hike in allowances from October this yeas ahead of festive season of Dussehra.

Once the new allowances are implemented, salaries of around 4.8 million central government employees will show better.