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7th Pay Commission – Government to Impose Income Tax on Allowances
The new allowances under the 7th Pay Commission will come under the ambit of income tax. This decision is not likely to go down too well with the central government employees who have already started protesting about the manner in which allowances were rolled out.
Meanwhile state government employees in Odisha have started protesting against the manner in which the pay panel’s recommendations were implemented. A programme called ‘Bhubaneswar Chalo,’ has been launched.
Allowances Under Income Tax
Senior finance ministry officials have said that the new allowances would come under the ambit of income tax. Income tax will be imposed on the allowances which were granted from the financial year 2017-18.
What Finance Bill 2017 Proposed
The tax treatment on basic salary, bonus and allowances for both government and non-government employees was proposed in the Finance Bill 2017. The government felt that if all allowances excluding basic salary of central government employees are made tax free, it would be discriminatory to others.
Employees’ Demand Not Met
Central government employees had demanded an exemption from income tax on new allowances. The employees had also demanded that the allowances come into effect with arrears starting July 2016. However the Union Cabinet last month implemented the 7th Pay Commission recommendations and said that the allowances would come into effect from July 2017 onwards, much to the dismay of the central government employees.
Terming the manner in which the 7th Pay Commission recommendations were rolled out as negligible, the employees have warned of severe consequences if the government further delays the implementation of pay panel’s reforms.