Apr 102016

50 Percent Of 7th Pay Commission Arrears To Be Invested In Bond

As per the recent talks in the Dept. of Finance, Govt. of India, there is a discussion going on about utilizing half of the arrears which the central govt. employees will be getting in bonds. As per the discussions, the central govt. employees are going to get their increments as per the 7th pay commission from 1st Jan, 2016. These 7th CPC increments, which are not yet implemented, will be given away in form of arrears. But as per recent talks, the higher income group central govt. employees may get half of their arrears invested in bank bonds. The extra benefit they will be getting is that the bonds will be entirely tax free.

50 Percent Of 7th Pay Commission Arrears To Be Invested In Bond

  • Tax relief for the extra arrear income

As per the new developments, the central govt. is willing to put half of the arrears of the high income salaried central govt. employees in investment policies of banks like bank capital bonds. This is a great investment technique and the banks will also get flourish and get some added capital. What added advantage, the central govt. employees will be getting is that the investment amount in capital bank bonds will be eligible for tax free.

  • Why there is a need of bank capital investment at this hour?

As per the new 7th pay commission, the govt. will have to shell out an annual corpus of Rs. 40 – 50 thousand crore in form of extra salary and allowance increments of the central govt. employees. This will be a huge financial burden for the Dept. of Finance over the coming one or two years. So as per the proposed plan, the govt. is thinking about investing some portion of the money in bank capitalization. Bank capitalization is a necessary step that will have to be taken at this hour so that to cope up with the sudden financial burden. So, half of the arrear money might be invested in bank bonds for some period of time as a major step to capitalize the banks.

  • Some details about the 7th CPC and related bank capitalization:
Sl. No. Attributes Related information
1 Addition expenditure for implementing new CPC Rs. 40 – 50 thousand crore
2 Additional capital needed by banks due to new CPC Rs. 1.8 lakh crore
3 Budget allocation for bank capitalization this year Rs. 25 thousand crore
4 Plan to lessen the financial burden Investment in bonds and shares issued by banks
  • What the proposed bonds will benefit the employees?

As per the recommendations, the investments in bank bonds out of the arrears of the high income group central govt. employees will be totally tax free. So, the employees will get added benefit of their arrears being invested in a good investment scheme. Also, the govt. will manage to ease off from the upcoming financial burden. This investment in bank capital bonds will attract interest rates of 5 % per annum. In the plan is implemented, the Govt. has decided to pay the invested amount back in 4 installments. The payback process will be started after 8 years of completion of bonds.

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