Take-home salaries of government employees to rise

Take-home salaries of government employees to rise

NEW DELHI: Take-home salaries of millions of workers could rise with the government moving to free employees from compulsory coverage in a state-run healthcare programme that costs them 6.5% on a cost to company basis, and give them the choice to buy a health insurance product from an insurance firm instead.
The government has called a meeting of the Employees’ State Insurance Corporation (ESIC) on Tuesday to approve amendments to this effect in the ESI Act of 1948, India’s first social security legislation. If ratified, the change could throw up a major opportunity for the country’s $2 billion health insurance business. Finance minister Arun Jaitley had declared the government’s intent to allow employees to exercise their individual choice in health insurance in his Budget speech.

“We intend to bring amending legislation in this regard, after stakeholder consultation,” he had said. “We have proposed adding two new sections to the law that gives employees a one-time option to opt for a health insurance product regulated by the IRDA. Employers would have to submit proof of such alternate coverage,” said a senior government official, adding that workers would be allowed to return to the ESI fold if they are not satisfied with the health insurance coverage. “However, such aswitch-back to the scheme would be allowed only once.

We are also putting in a safeguard, so that employers can’t force workers to opt for either the ESI or a health insurance product as a pre-condition for employment,” he added. About 60% of India’s organised sector workforce or 1.74 crore employees are covered by the ESIC, which offers medical care to them and their dependents along with unemployment benefits in case of disablement or occupational accidents, including fatal ones. The law mandates employers to contribute 4.75% of an employees’ gross salary (up to Rs.15,000 per month) with a 1.75% matching premium payment from employees. In return, members get access to ESIC’s 151 hospitals and 1,380 dispensaries around the country.

Trade unions are annoyed with the haste in which the corporation meeting has been scheduled. “We got a notice about the meeting on April 2, after which there have been a slew of government holidays. Moreover, any amendments to the law are usually debated by our board first. This is the first time that the government is bringing amendments to the table,” said the general secretary of a major trade union, who is on the ESIC board.

Source: http://economictimes.indiatimes.com

Proposal to discontinue exemption of Rs. 1.5 lakh available for Savings under Section 80C

Proposal to discontinue exemption of Rs. 1.5 lakh available for Savings under Section 80C

It is learnt that Finance Ministry is considering to put up a proposal for discontinuing Exemption of Rs. 1.5 lakh presently available under Section 80C for Savings and Insurance such as premium paid, investment in NSS, Mutual funds, Pension funds etc. Alternatively, the basic income tax exemption limit of Rs. 2.5 lakh would be raised to Rs. 4 lakh. Reasons behind such a bold move by Finance Ministry as per sources are:
1. Income Tax Department could not verify whether the Investments declared to be have been made to avail exemption under Section 80 C were actually made

2. To make Income Tax Law simple by raising basic Income Tax Exemption Limit and avoid complexities involved in providing Income Tax Exemption to promote savings.

As per Finance Ministry proposals, the current system allows individuals to avail of the Section 80C benefit without having made the required investments.

Most of the tax returns by individuals are processed by what is called a ‘summary assessment’, under which an adjustment in the reported income is made only in cases of arithmetic error or of a wrong claim that is apparent from the return filed. Officials do not ask questions or insist on proof of investment while processing returns. Only in cases of ‘scrutiny assessment’ and ‘assessment of income that has earlier escaped assessment’, which are done in very few cases, more information or evidence is sought to ensure that the reported income is correct.

Even in the case of salaried individuals, where the employer may insist on proof of investments, the tax authorities do not. Besides, if a salaried individual wrongly claims in his return that Section 80C investments have been made, the TDS by the employer and paid to the department is refunded by the tax authorities without asking any questions. In the case of self-employed, there is no check either by the employer or the taxman.

So the ministry feels that any individual who is actually interested in saving would anyway do it and there is really no need to incentivise the same through the tax policy.

Savings entitled to tax benefit under Section 80C include payments towards life insurance, deferred annuity, provident funds, National Savings Certificates, unit-linked investment plans of LIC Mutual Fund, pension funds set up by mutual funds, equity-linked savings plans, deposits with National Housing Bank and tuition free paid for education of children.

Source: Financial Express