News from Secretary General of Confederation

News from Secretary General Confederation

(CONFEDERATION OF CENTRAL GOVT. EMPLOYEES & WORKERS)

The last National Sectt. Meeting inter alia discussed the possibility of a joint action programme with the AISGEF and AIDEF in the event of the Government introducing the PFRDA Bill and the new direct taxes code in the Budget session of the Parliament. While the AISGEF was to take a decision in the matter in their all India Conference which was scheduled to be held in the first week of February at Hyderabad, the AIDEF had promised us to discuss the issue in their organizational fora and revert back to us. So far we have not received any communication from the AIDEF. The All India Conference of the AISGEF had to be postponed due to the ongoing agitation in Andhra Pradesh. Hence, no finality could be reached on the proposal for organizing a day’s strike somewhere in March, 2010.



The Budget session is likely to commence on 22nd Feb.2010. The National Secretariat had discussed of the necessity of organizing a demonstrative programme in the first week of the Parliament session. It was decided that Lunch recess programme should be organized in front of all offices eliciting the participation of all the employees in the respective office on a pre determined date. Taking into account the requirement of sufficient time to organize the programme, we call upon the affiliates and State Committees to ensure that the lunch hour demonstration is organized in front of all offices on 10th March, 2010 to oppose the introduction of the new Direct Taxes code and the reintroduction of the PFRDA Bill. The following telegram/Savingram may be sent to the Hon’ble Finance Minister, Shri Pranab Kumar Mukherji, (at North Block, Central Sectt. New Delhi.)

Reintroduce the statutory defined benefit pension scheme for all CGEmployees recruited after .1.1.2004 by withdrawing the PFRDA Bill and amend the direct taxes code as demanded in the memorandum submitted by the Confederation of CGE and Workers.

Enclosed herewith is a copy of the letter sent by the Confederation to the Hon’ble Finance Minister in response to the draft proposal placed on the website by the government.

With greetings,

Yours fraternally,

K.K.N. Kutty

Secretary General.

To

Shri Pranab Kumar Mukherji,

Hon’ble Finance Minister,

Govt. of India,


North Block,

New Delhi. 110 001.

Dear Sir,

Sub: Restoration of the deduction under Section 16(1) of the Income - tax Act. Withdrawn by the Finance Act, 2005. Request – Reg

We submit the following Note for your kind consideration on the above subject. The Finance Act 2005 had withdrawn the deduction admissible under Section 16(1) of the Income tax Act, to the salaried tax payers of the country. We were unable to comprehend the logic or reasoning of this decision. We had been representing for the restoration of this deduction which would go a long way in reducing the tax burden of the salaried tax payers. The unjustified withdrawal of this deduction which had been in the statute book for more than a decade and half in one form or the other has resulted in increasing the tax burden of the wage earners in the country.

We may also state in this connection that the salaried tax payers do pay their taxes to the Government without indulging in any evasion or avoidance and the tax on the salary earned by them is properly deducted at source by the employer. While the expenditure incurred by every tax payer in the country for the purpose of earning the income is allowed as an admissible deduction, no such deduction is now permitted while computing the taxable income from salary. Only the salaried tax payers are taken out of the ambit of this logical and genuine approach of taxation of income. We, therefore, request your good self on behalf of not only the Central Government employees but all salaried class of tax payers in the country to kindly consider re-introduction of the standard deduction which was to the extent of 30% of the total salary income of an individual. The enclosed Note presents the justification for the consideration of this request.


Thanking you,


Yours faithfully,

K.K.N. Kutty.

Secretary General.

Section 16(1) Deduction.

Standard Deduction earlier allowed under Section 16(i) of the Income Tax Act, 1961 was withdrawn by the Finance Act 2005 with effect from the Asst. Year 2005-06. The basic premise on which the principle of taxation of income rests is that, it is not the gross income which is subjected to tax, but the net income arrived at after deducting the related expenses incurred in connection with earning such income, that are made the basis of taxation. This principle is observed while taxing all classes of incomes, viz., Income from Business & Profession, House Property, Other Sources, Capital Gains etc..


To illustrate the point further it could be seen that the assesses having Income from “Business & Profession” is entitled to deductions in respect of certain specified expenditure under Section 36 of the Income Tax Act and also general deductions in respect of any other expenditure, not being in the nature of capital expenditure or personal expenditure of the assessee, laid out or expended wholly or exclusively for the purposes of the relevant business or profession u/s 37 of the Act. Similarly, income chargeable under the head “Income from House Property” is computed after making deductions in respect of certain expenses incidental to earning that income, under Section 24 of the IT Act. Analogously, the income chargeable under the head “Capital Gains” has to be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, inter-alia the expenditure incurred wholly and exclusively in connection with such transfer, in terms of Section 48(i) of the I.T. Act and the income chargeable under the head “Income from Other Sources” has also to be computed after making deductions in respect of certain expenditure incidental to earning that income in accordance with Section 57 of the I.T. Act. In the case of income chargeable under the head “Salary”, only a presumptive deduction used to be allowed earlier towards expenses which the employee might have incurred for earning the salary income, in the form of Standard Deduction under Section 16(i) of the IT Act. This was withdrawn by the Finance Act 2005 and unfortunately, the Finance Act, 2006 or the subsequent one did not reintroduce the Standard Deduction in spite of various representations made before the Govt. from various quarters of the employees including the Service Associations


From the above, it would transpire that the Finance Act 2005 singled out the income chargeable under the head “Salary” to take away the deductions legitimately admissible for the expenses, which is wholly and exclusively incurred for earning the salary income. This is a clear case of deviation from the principle of equity enshrined in the Constitution and also the principles of taxation of income enshrined in the Income Tax Act which continues till its abolition in 2005. Ironically, identical Standard Deduction granted under Section 57(iia) in the case of income in the nature of family pension has been allowed to continue as such, while the Standard Deduction allowable in respect of income under the head “Salary” has been done away with. This is clearly discriminatory, unjust and as such should be restored in the Finance Act 2009 so as to bring about equity and justice.

PFRDA's low-cost pension plan to take off on April 1

The Pension Fund Regulatory and Development Authority (PFRDA) will launch a low-cost pension scheme on April 1 to provide social security cover to economically weaker sections like rickshaw pullers, barbers and daily-wage labourers.




"We would launch a low-cost pension scheme from April 1, 2010. Individuals could join the scheme as part of a self-help group," a PFRDA official told PTI.



Under the new pension scheme, a subscriber will have to initially pay Rs 105 and after that Rs 70 every year for maintenance of account. For normal scheme, the joining and annual charges are Rs 470 and Rs 350, respectively.



"Besides the initial payment, the account holder under the new scheme will have to pay Rs 35 to obtain Permanent Retirement Account Number (PRAN)," the official added.



There would be no lower limit for contribution to the pension fund, the official said, adding the Self-Help Group (SHG) can play a major role in popularising the scheme and supplementing the efforts of the government to promote financial inclusion and provide social security to a large number of people.



Initially, the government launched the New Pension System for central government employees joining service from January 1, 2004, but from May 1 this year it was extended to all citizens.



The response to the all citizens' pension scheme has, however, been lukewarm in the first few months.



According to information available on the PFRDA website, only 2,818 subscribers have joined the scheme till December 5.



The official further said the investment in the low cost pension scheme should only be made as a group though the subscribers would be allowed to maintain their individual accounts.



"There would be no minimum limit paid by the subscriber for the corpus. So the investment made for the corpus should only be made as a group," the official said.



Under the present structure, a person has to deposit a minimum of Rs 6,000 each year into his account.



The withdrawal of money from the corpus would follow the same rules as the existing structure.



At present, only 20 per cent amount can be withdrawn as lump sum if a subscriber wants to withdraw his pension corpus before the age of 60.



The subscriber has to invest at least 80 per cent to purchase a life annuity from any IRDA-regulated life insurance company.



In case of death, options would be available to the nominee to receive 100 per cent of the NPS pension wealth in lump sum.



There are six fund managers for the citizens' scheme. These include IDFC Mutual Fund, Kotak Mahindra, SBI, UTI Asset Management, ICICI Prudential Life Insurance and Reliance MF.


Source:Busines Standard

PFRDA board clears extra a/c for NPS subscribers

The Pension Fund Regulatory Development Authority (PFRDA) board on Wednesday decided to provide the New Pension System (NPS) subscribers with an extra account from which funds can be withdrawn anytime they want.



An NPS subscriber can now have two accounts—a standard one and a flexible one. Although the norms for investing the contributions to these two accounts would be the same, subscribers will have greater flexibility in accessing funds from the second one, when needed. One can access funds from the standard account called tier one only for specific needs such as medical emergency or marriage. The flexible account will be introduced on December 1, 2009.



The pension regulator also decided in principle to introduce a low-cost pension scheme for the poor, for which PFRDA is negotiating with the record keeper to reduce the annual charges from Rs 350 to Rs 60, PFRDA chairman D Swarup told ET.



The National Securities Depositories (NSDL) has agreed to slash the charges to Rs 75 a year, but PFRDA is negotiating to further lower it to Rs 60. The scheme would enable a large section of the nearly 28 crore low-income workers such as rickshaw pullers, fishermen, weavers and street hawkers to have a safety net to lean on when they enter the twilight years of their working life.



“The idea of having more than one record keeping agency has also received the blessings of the PFRDA board,” said Mr Swarup. Competition among record keeping agencies would bring down cost and enhance efficiency, pension experts said.



The three-member board of the regulator also decided to accept proposals from corporate entities to manage their pension funds subject to the condition that these entities will have only those investment choices that are available to any other pension subscriber. They will not be able to customise the investment options NPS’ fund management charges are quite low. The regulator has already received proposals in this regard from SBI and Himachal Road Transport Corporation.

source:The Economic Times

PFRDA sees ally in post offices to offer NPS services

Post offices will soon offer services under the new pension system as the department of posts is set to sign an agreement with the Pension Fund Regulatory and Development Authority (PFRDA) in this regard. Initially, the services will be available only in computerised post offices, an official in the ministry of communications & IT said.



After the agreement, the postal department will act as an agency to enrol NPS customers, the official said requesting anonymity. Technically known as ‘points of presence’ (PoPs), these agencies serve as contact and collection centres where pension contributions are collected under the NPS scheme. There are 21 PoPs providing NPS services including banks such as State Bank of India, Axis Bank, ICICI Bank, Oriental Bank of Union Bank of India.



The pension regulator is now convinced that some of the post offices have the IT infrastructure to serve the scheme.



Earlier, the watchdog had expressed doubt due to the poor IT penetration in the postal system, post offices may not be able to provide NPS services. “But around 3,000 post offices were found to be fully equipped,” the official said. The official didn’t specify the time frame within which the agreement will be signed. The PFRDA
opened up the new pension system to all citizens from May 1, 2009. It is compulsory for all government employees joining service on or after January 1, 2004.



Under the new pension system, instead of agents selling the scheme, the regulator has banks and other financial institutions as points of presence, where an account could be opened. As a result, the marketing cost of the pension plan remains low and the fees applicable are disclosed upfront. The scheme offers a social security net for workers in the unorganised sector too.



The regulator is now in talks with the government to bear the transaction cost for the unorganised sector, which would make the scheme even more attractive.

Source: The Economic Times

NEW PENSION SCHEME - Details

Some questions and answers about New Pension Scheme (NPS)


1. What is the New Pension System (NPS)?


The NPS is a new contributory pension scheme introduced by the Central Government for its own new employees. Under the new pension system, each new central government employee will open a personal retirement account on joining service. Every month, and till the employee retires or leaves government service, a part of the employee's salary will be transferred into this account. When the person retires, he will be able to use these savings to take care of the needs and expenses of his family during old age.



2. Who is covered by the NPS?


You are covered by the NPS if


a.You joined central government service on or after 01 January 2004, and


b.You are an employee of a Central (Civil) Ministry or Departments, or


c.You are an employee of a non-civil Ministry or Department including Railways, Posts, Telecommunication or Armed Forces (Civil), or


d.You are an employee of an Autonomous Body, Grant-in-Aid Institution, Union Territory or any other undertaking whose employees are eligible to a pension from the Consolidated Fund of India.



3. If I joined Central Government service on or after 01 January 2004 do I have an option of not being covered by the NPS?


No. The NPS is mandatory for you.



4. I am covered by the NPS. Do the old Pension Rules apply to me?


No. The Central Civil Service Pension Rules (1972) do not apply to you. You are covered only by the New Pension System Rules framed for the NPS.



5. I am covered by the NPS. Can I contribute to the GPF?


No. The General Provident Fund (Central Service) Rules, 1960 also do not apply to you. You will not be permitted to contribute towards GPF.



6. Am covered by the NPS. Am I eligible to Gratuity?


No. You will not be eligible to Gratuity.



7. How does the NPS work?


When you join Government service, you will be allotted a unique Personal Pension
Account Number (PPAN). This unique account number will remain the same for the rest of your life. You will be able to use this account and this unique PPAN from any location and also if you change your job. The PPAN will provide you with two personal accounts:


1. A mandatory Tier-I pension account, and


2. A voluntary Tier-II savings account.



8. What is the difference between Tier-I and Tier-II accounts?


1. Tier-I account: You will have to contribute 10% of your basic+DA+DP into your Tier-I (pension) account on a mandatory basis every month. You will not be allowed to withdraw your savings from this account till you retire at age 60. Your monthly contributions and your savings in this account, subject to a ceiling to be decided by the government, will be exempt from income tax. These savings will only be taxed when you withdraw them at retirement.


2. Tier-II account: This is simply a voluntary savings facility for you. Your contributions and savings in this account will not enjoy any tax advantages. But you will be free to withdraw your savings from this account whenever you wish.



9. How will I contribute to my Tier-I (pension) account?


Every month, the government will deduct 10% of your salary (basic+DA+DP) and automatically transfer this amount to your Tier-I account in your name.



10. Will the Government contribute anything to my Tier-I (pension) account?


Yes. As your employer, the Government will match your contribution (10% of basic+DA+DP) and transfer this amount also to your Tier-I account in your name.



11. Can I contribute more than 10 into my Tier-I account?


Yes. You will be permitted to contribute more than the mandated 10% of Basic+DA+DP into your Tier-I account – subject to any ceiling that may be decided by the Government.



12. Will the Government also contribute more than 10 into my Tier-I account?


No. The contribution of the Government will be limited to 10% of your basic+DA+DP.



13. What will happen if I am transferred to another city or country?


The PPAN number will stay the same and you will be able to use the same accounts from anywhere in the world.



14. If I leave Government service before I retire will the Government continue to
contribute to my Tier-I account?


No. The 10% contribution by the Government will stop when you leave Government service. However, your savings in your Tier-I and Tier-II accounts will stay in your name and you will be able to continue using these accounts to save for your retirement.



15. What if I die or become permanently disabled during my service?


Pl.refer Office Memorandum: Additional Relief on death/disability of Government servants covered by the NPS(New Pension Scheme) recruited on or after 1.1.2004 No.38/41/06/P&PW(A) Dated 5th May, 2009



16. Where will my savings be invested?


Each PFM will offer you a limited number of simple, standard schemes. You will be free to choose any of the following schemes for investing your savings:


Scheme A This scheme will invest mainly in Government bonds


Scheme B This scheme will invest mainly in corporate bonds and partly in equity and government bonds


Scheme C This scheme will invest mainly in equity and partly in government bonds and corporate bonds.



17. I am covered by the NPS. Do the old Pension Rules apply to me?


No. The Central Civil Service Pension Rules (1972) do not apply to you. You are covered only by the New Pension System Rules framed for the NPS.



18. I am covered by the NPS. Can I contribute to the GPF?


No. The General Provident Fund (Central Service) Rules, 1960 also do not apply to you. You will not be permitted to contribute towards GPF.



19. Who will be responsible for the NPS and for protecting my interests?


The Government is setting up a new dedicated regulatory authority. This will be named the Pension Fund Regulatory and Development Authority (PFRDA). The PFRDA will be responsible for the NPS and for protecting your interests in the NPS.



20. When will my contributions start?


Your contributions (and the matching contribution by the Government) towards your Tier-I pension account will begin only from the month following the month in which you join Government service. During the first month of your service, you will be allotted the PPAN.(PRAN)



21. Who in the Government will issue me a PPAN open my accounts and be responsible for the deductions?


When you join service, your Drawing and Disbursement Officer (DDO) will instruct
you to fill out a NPS form. You will be required to provide your full professional
and personal details including details of your nominee in this form. The DDO will issue you the PPAN number(PRAN) and will also be responsible for all administrative matters related to your NPS accounts including deduction of your contributions, transferring your contributions and the matching contribution of the Government to your Tier-I pension account.



22. What will happen to my contributions to my Tier-I account?


Your monthly contributions, and the matching contributions by the Government into your Tier-I account, will be transferred by the Government in your name to a Pension Fund Manager (PFM). The PFM will invest your contributions on your behalf. In this way, your savings will earn an interest and grow over time.



23. Which agency will serve as a PFM?


The PFRDA will appoint a limited number of leading professional firms to act as PFMs.
One of these PFMs will be a public sector agency.



24. Who will decide which PFM manages my contributions and savings?


You will select a PFM to manage your contributions and savings.



25. Will I be permitted to select more than one PFM to manage my savings?


Yes. If you wish, you will be able to spread your savings across multiple PFMs –
where a part of your savings are managed by 2 or more PFMs.



26. Will I be permitted to change my PFM preference?


Yes. If you wish, you will be free to change the PFM and move all your savings to
another PFM of your choice.



27. Where will my savings be invested?


Each PFM will offer you a limited number of simple, standard schemes. You will be free to choose any of the following schemes for investing your savings:



Scheme A This scheme will invest mainly in Government bonds



Scheme B This scheme will invest mainly in corporate bonds and partly in equity and government bonds



Scheme C This scheme will invest mainly in equity and partly in government bonds and corporate bonds




28. Will I be able to select more than one scheme?


Yes. You will be free to spread your savings across these three schemes. Whenever you decide, you will also be free to switch your savings from one scheme to another.



29. How will my contributions be transferred to the PFM and scheme selected by me?


You will specify the PFM and scheme to your DDO. The DDO will arrange for transfer of your contributions to the PFM(s) and scheme(s) that you have selected.



30. What rate of return will my contributions earn?


Your contributions will not earn any specified rate of return.
The PFM will invest your savings in a scheme of your choice.The returns
earned by the PFM on the scheme selected by you will be credited to your account.




31. Will I have to pay any fees or charges under NPS?


You will have to pay a fee to the Central Recordkeeping Agency (CRA) which will maintain your accounts and also to the PFM(s) which manage your savings. These charges will be deducted from your savings on a periodic basis. The fees and charges by the CRA and PFMs will be regulated by the PFRDA.




32. Can I contribute more than the 10 of basic+DA+DP into my TierI account at the moment?


No. You will be allowed to do so only when the PFRDA, CRA and PFMs are appointed.



33. What will happen to my contributions and earnings in my Tier-I account when the PFRDA CRA and PFMs etc. are appointed?



Your full contributions, matching contributions by the Government, and the interest earned on the same will be transferred in your name to the PFM and scheme selected by you.



34. Will I have the option of continuing with the current 8 percent rate of return?

No. Once your savings are transferred to the PFM, your savings will enjoy only the
rate of return earned by the PFM on scheme you have selected.



35. When will I be permitted to withdraw from my Tier-I account?


You will be able to withdraw your savings in your Tier-I account at age 60.



36. What will happen to my savings in the Tier-I account when I retire?


You will be able to withdraw 60% of your savings as a lumpsum when you retire. You will be required to use the balance 40% of your savings to purchase an annuity scheme from a life insurance company of your choice. The life insurance company will
pay you a monthly pension for the rest of your life.




37. Can I use more than 40 of my savings to purchase the annuity?


Yes.



38. What will happen to my savings if I decide to retire before age 60?


You will be required to use 80% of your savings in your Tier-I account to purchase the annuity. You will be able to withdraw the balance 20% of your savings as a lumpsum.



39. Will the annuity also provide a family (survivor) pension?


Yes. You will have an option of selecting an annuity which will pay a survivor pension to your spouse.



40. What will happen to my savings if I decide to retire before age 60?


You will be required to use 80% of your savings in your Tier-I account to purchase the annuity. You will be able to withdraw the balance 20% of your savings as a lumpsum.



41. What will happen to my savings in the Tier-I account when I retire?


You will be able to withdraw 60% of your savings as a lumpsum when you retire. You will be required to use the balance 40% of your savings to purchase an annuity scheme from a life insurance company of your choice. The life insurance company will pay you a monthly pension for the rest of your life.



42. What if I die or become permanently disabled during my service?


The Government is yet to issue any guidelines on this.



43. Will I have to pay any fees or charges under NPS?


You will have to pay a fee to the Central Recordkeeping Agency (CRA) which will maintain your accounts and also to the PFM(s) which manage your savings. These charges will be deducted from your savings on a periodic basis. The fees and charges by the CRA and PFMs will be regulated by the PFRDA.



44. What will happen to my contributions to my Tier-I account?


Your monthly contributions, and the matching contributions by the Government into your Tier-I account, will be transferred by the Government in your name to a Pension Fund Manager (PFM). The PFM will invest your contributions on your behalf. In this way, your savings will earn an interest and grow over time.

New Pension Scheme - Recruited on or after 1.1.2004

THE GAZETTE OF INDIA

EXTRAORDINARY - PART I - SECTION 1

PUBLISHED BY AUTHORITY

New Delhi, Monday, December 22, 2003/PAUSA 1, 1925

Ministry of Finance

(Department of Economic Affairs)

(ECB & PR Division)

NewDelhi,the 22nd December,2003.

F.No.5/7/2003-ECB & PR. – The Government approved on 23rd August, 2003 the proposal
to implement the budget announcement of 2003-2004 relating to introducing a new restructured defined contribution pension system for new entrants to Central Government Service, except to Armed Forces, in the first stage, replacing the existing system of defined benefit pension system.

(i) The system would be mandatory for all new recruits to the Central Government Service from 1st of January 2004 (except the armed forces in the first stage.). The monthly contribution would be 10 percent of the salary and DA to be paid by the employee and matched by the Central Government. However, there will be no contribution form the Government in respect of individuals who are not Government employees. The contributions and investment returns would be deposited in a non-withdrawable pension tier-1 account. The existing provisions of defined benefit pension and GPF would not be available to the new recruits in the Central Government service.

(ii) In addition to the above pension, accout, each individual may also have a voluntary tier-II withdrawable account at his option. This option is given as GPF will be withdrawn for new recruits in Central Government service. Government will make no contribution into this account. These assets would be managed through exactly the above procedures. However, the employee would be free to withdraw part
or all of the ‘second tire’ of his money anytime. This withdrawable account does not constitute pension, investment, and would attract no special tax treatment.

(iii) Individuals can normally exit at or after age 60 years for tier-I of the pwnsion system. At exit the individual would be amndatorily required to invest 40 percent of pension wialth ot purchase an annuity (from an IRDA-regulated life insurance company).In case of Government employees the annuity should provide for pension for the lifetime of the employee and his dependent parents and his spouse at the time of retirement. The individual would receive a lump-sum of the remaining pension wealth, which he would be free to utilize in any manner. Inidviduals would have the flexibility to leave the pension system prior to age 60. However, in this
case, the mandatory annuitisation would be 80% of the pension wealth.

Architecture of the New Pension System



(iv) It will have a central record keeping and accounting (CRA) ingrastructure, several pension fund managers (PFMs) to offer three categories of shemes viz. option A, B and C.



(v) The participating entities (PFMs and CRA) would give out easily understood information about past performance, so that the individual would able to make informed choices about which scheme to choose.



(2) The effective date for operationalisation of the new pension system shall be from 1st of January, 2004.



Incase of Death or Disability of Government servants recruited on or before 1.1.2004


Additional Relief on death/disability of Government servants covered by the NPS(New Pension Scheme) recruited on or after 1.1.2004




The Central Government has introduced the New Pension System (NPS) with effect from
01 January 2004.


The NPS covers, at present, new entrants to Central Government services (excluding Defence Forces) and is also available to all other citizens of India from 1st May 2009.


Pension Fund Regulatory and Development Authority (PFRDA) has been established through a Government Order to oversee and regulate implementation of the NPS system.
The NPS is based on individual pension accounts of participating subscribers. Each NPS subscriber is allotted a unique Permanent Retirement Account Number (PRAN).


This pension system is based on two types of sub-accounts created by individual subscribers: Tier-I non-withdrawable pension account, and Tier-II withdrawable savings account.



PFRDA has already put in place the institutional framework and infrastructure required for administering the ‘New Pension Scheme’ (NPS) for government employees as well as other citizens of India.



Various institutional entities such as

Central Record Keeping Agency (CRA),

Pension Fund Manager(PFM),

Trustee Bank (TB),

Custodian and NPS

Trust have been appointed and are now functional.



with various intermediaries. Immediately after passage of the PFRDA Bill, necessaryregulations are to be notified under the PFRDA Act.



Application Form PRAN





WELCOME KIT - Details of New Pension Scheme



Pending passage of the Pension Fund Regulatory and Development Authority (PFRDA) Bill in Parliament, a conference of Chief Ministers of the various State Governments was organized by the Ministry of Finance, Government of India in January 2007 on the New Pension System (NPS). As part of the action taken on the decisions taken at the conference, the Government of India has advised PFRDA to appoint, from the public sector, a Central Recordkeeping Agency and Fund Managers to manage the pension funds of employees of the Central Government and autonomous bodies covered by the NPS. Later, the system developed by the selected CRA and pension funds is expected to be offered to the State/Union Territory Governments for their use and for use by the autonomous bodies under such governments covered by the NPS.



Selection of Record-keeping Agency (CRA)



PFRDA issued an advertisement (22nd January 2007) inviting Expression of Interest (EoI) from public sector entities with experience of developing and managing technology based central administration and recordkeeping systems, for functioning as CRA responsible for opening and maintenance of personal retirement accounts of the subscribers under the NPS and providing a number of related services.



Public sector entities with at least 5 years in central recordkeeping and administration functions, minimum positive net worth of Rs.50 crore (Rupees Fifty crore) and experience in managing over five lakh individual accounts per year over the last three years were eligible to submit expression of interest.



In response to the advertisement, PFRDA received EoIs from the following six entitles


· Life Insurance Corporation of India


· National Securities Depository Limited


· Stock Holding Corporation of India Limited


· Union Bank of India


· UTI Technology Services Limited


· Writer Information





The EoIs submitted by all the six entities were scrutinized in the light of eligibility criteria prescribed by the PFRDA and Request for Proposal (RFP) documents, inviting detailed technical and commercial proposal, were issued to the following four entities which satisfied the eligibility conditions:




· Life Insurance Corporation of India


· National Securities Depository Limited


· Stock Holding Corporation of India Limited


· UTI Technology Services Limited



Out of these four entities only three entities submitted their technical and commercial proposal to PFRDA in accordance with the requirements detailed in the RFP documents. Life Insurance Corporation did not submit any proposal.



An evaluation committee was constituted to evaluate the technical and commercial proposals and to recommend to PFRDA the most suitable entity to function as CRA. The committee recommended National Securities Depository Limited as the most suitable entity to function as CRA based on the requirements specified in the RFP document. PFRDA accepted the report of the committee and has selected the National Securities Depository Limited as CRA. Contract negotiations are underway and NSDL is expected to be appointed as the CRA in respect of Government employees under the NPS, shortly.





Selection of sponsors of Fund Managers





PFRDA issued an advertisement and Preliminary Information Memorandum (PIM) inviting Expressions of Interest (EOI) from public sector entities for sponsoring Pension Funds for Government employees under the New Pension System. To be eligible, the sponsors were, inter alia, required to have at least 5 years experience of fund management, with average assets under management of not less than Rs. 10,000 crore for the month of March 2007.





The last date for submission of Expression of Interest (EoI) was 25th May 2007. In response, Expressions of Interest were received from seven public sector entities namely, Canara Bank, IDBI Capital Market Services Limited, Life Insurance Corporation of India, State Bank of India , UTI Asset Management Company Private Limited, Securities Trading Corporation of India Limited and Punjab National Bank.





Four out of these seven entities met the requirements of eligibility as laid out in the PIM and were invited for issuance of Request for Proposal (RFP) for sponsoring Pension Funds under the NPS. The four entities to which the Request for Proposal (RFP) was issued on 11th June 2007 are, IDBI Capital Market Services Limited, Life Insurance Corporation of India, State Bank of India and UTI Asset Management Company Private Limited.





Their proposals, including the technical and commercial bids, were received in PFRDA by the deadline of 4th July 2007. An independent Selection Committee was constituted by PFRDA and entrusted with the responsibility of evaluation of the proposals received from the eligible entities, and to short-list the three best value bidders in terms of requirements (technical & commercial) of RFP.





Based on the overall evaluation, including technical and commercial parameters, the Committee found (i) State Bank India, (ii) UTI Asset Management Company Private Limited and (iii) Life Insurance Corporation of India as the three best value bidders, and recommended their appointment as sponsors of Pension Funds under the New Pension System.





Contract agreements with the selected sponsors are expected to be signed shortly, authorizing them to incorporate separate companies as pension funds for managing the corpus under the NPS.

All India Defence Employees Federation - Kelkar Committee

All India Defence Employees Federation (AIDEF)


*******


THE 4.5 lakh defence civilian employees have decided to join the countrywide strike of the working class on September 29. They have also decided to fight against the retrograde recommendations of the Kelkar committee.



This was decided in the national executive committee meeting of the All India Defence Employees Federation (AIDEF) held on July 13-14, 2005. The Kelkar committee has recommended corporatisation of the 39 Ordnance factories in the country, which are at present under the direct control of the government of India, with the ultimate intention of privatisation.



The AIDEF has decided to launch persistent struggle demanding for the rejection of the report by the government of India. The AIDEF has directed its 367 affiliated unions to stage massive demonstrations against the Kelkar committee report on August 24, 2005 and also to burn the copies of the report.



The AIDEF has endorsed all the decisions taken in the National Convention of Trade Unions held on July 9, 2005 at New Delhi. The 4.5 lakh defence civilian employees will participate in the September 29 strike. The strike ballot will be taken by the affiliated unions on September 12 and the strike notice will be served on September 15, 2005.



The AIDEF has also opposed the New Contributory Pension Scheme and has decided to stage protest demonstrations on the day when the PFRDA bill is placed for voting in the parliament.

New Pension Scheme-effect from 1-1-2004

New Pension Scheme (NPS)(effect from 1-1-2004 )




G.I., M.F., F.No.1(7)(2)/2003/TA/11, Dated: 7-1-2004 read with O.M.No. 1(7)(2)/2003/TA/67-74, Dated: 4-2-2004




1.Salient features of New Pension Scheme

Government of India have introduced a new Defined Contribution Pension Scheme
replacing the existing system of Defined Benefit Pension System vide Government of
India, Ministry of Finance, Department of Economic Affairs Notification, dated 22-2-
2003. The New Pension Scheme comes into operation with effect from 1-1-2004 and is applicable to all new entrants to Central Government service, except to Armed Forces,
joining Government service on or after 1-1-2004.



The salient features of the New Pension scheme are as follows:-



The New Pension Scheme will work on defined contribution basis and will have two
tiers-Tiers-I and II. Contribution to Tier-I is mandatory for all Government servants
joining Government service on or after 1-1-2004, whereas Tier-ii will be optional and
at the discretion of Government servants.



..In Tier-I, Government servants will have to make a contribution of 10% of his basic pay plus DA, which will be deducted from his salary bill every month by the PAO concerned. The Government will make an equal matching contribution.



..Tier-I contributions (and the investment returns) will be kept in a non-withdrawal
Pension Tier-I Account. Tier-II contributions will be kept in a separate account that
will be withdrawal at the option of the Government servant. Government will not
make any contribution to Tier-II account.



..The existing provisions of Defined Benefit Pension and GPF would not be available
to new Government servants joining Government service on or after 1-1-2004.



..In order to implement the Scheme, there will be a Central Record Keeping Agency
and several Pension Fund Managers to offer three categories of Schemes to
Government servants, viz., options A, B and C based on the ratio of investment in
fixed income instruments and equities. An independent Pension Fund Regulatory and
Development Authority (PFRDA) will regulate and develop the pension market.



..As an interim arrangement, till such time the Statutory PFRDA is set up, an interim
PFRDA has been appointed by issuing an executive order by M/o Finance (DEA).



..Till the regular Central Record Keeping Agency and Pension Fund Managers are
appointed and the accumulated balances under each individual account are transferred
to them, it has been decided that such amounts representing the contributions made
by the Government servants and the matching contribution made by the Government
will be kept in the Public Account of India. This will be purely a temporary
arrangement as announced by the Government.



..It has also been decided that Tier-II will not be made operative during the interim
period.



..A Government servant can exit at or after the age of 60 years from the Tier-I of the scheme. At exit, it would be mandatory for him to invest 40 per cent of pension
wealth to purchase an annuity (from an IRDA, regulated Life Insurance Company,
which will provide for pension for the lifetime of the employee and his dependent
parents/spouse. In the case of Government servants who leave the Scheme before




G.I., M.F., F.No.1(7)(2)/2003/TA/11, Dated: 7-1-2004 read with O.M.No. 1(7)(2)/2003/TA/67-74, Dated: 4-2-2004



2.attaining the age of 60, the mandatory annuitisation would be 80% of the pension
wealth.The following guidelines are issued for the implementation of the New Pension
Scheme during the interim arrangement for the guidance of the PAOs/DDOs:
(a) The new pension scheme becomes operational with effect from 1-1-2004.
(b) Contributions payable by the Government servants towards the Scheme under
Tier-I, i.e., 10% of the (Basic Pay plus DA), will be recovered from the salary
bills every month.



(c) The scheme of voluntary contributions under Tier-II will not be made
operative during the period of Interim arrangement and therefore no
recoveries will be made from the salaries of the employees on this account.



(d) Recoveries towards Tier-I contribution will start from the salary of the month
following the month in which the government servant has joined service.
Therefore, no recovery will be affected for the month of joining. For
example, for employees joining service in the month of January 2004,
deductions towards Tier-I contribution will start from the salary bill of
February, 2004. No deduction will be made for his salary earned in January
2004. Similarly, deductions for those joining service in the month of
February, 2004 will start from the salary bill of March, 2004 and so on.



(e) No deductions will be made towards GPF contribution from the Government
servants joining the service on or after 1-1-2004 as the GPF scheme is not
applicable to them.



(f) It has been decided that pending formation of a regular Central Record
Keeping Agency, Central Pension Accounting Office will function as the
Central Record Keeping Agency for the above scheme.



(g) Immediately on joining Government service, the Government service, the
Government servant will be required to provide particulars such as his name,
designation, scale of pay, date of birth, nominee(s) for the fund, relationship
of the nominee, etc., in the prescribed form (Annexure-I). The DDO
concerned will be responsible for obtaining this information from all
Government servants covered under the new Pension Scheme. Consolidated
information for all those who have joined service during the month shall be
submitted by the DDO concerned in the prescribed format (Annexure-II) to
his pay and Accounts Officer by 7th of the following month. Annexure-I will
be retained by DDOs.



(h) On receipt of Annexure-II from the DDOs, PAO will allot a unique 16 digit
Permanent Pension Account Number (PPAN). The first four digits of this
number will indicate the calendar year of joining Government service, the
next digit indicates whether it is a Civil or a Non-Civil Ministry (for all Civil
Ministries this digit will be "1"), the next six digits would represent the PAO
code (which is used for the purpose of compiling monthly accounts), the last
five digits will be the running serial number of the individual Government
servant which will be allotted by the PAO concerned. PAO will allot the
serial number pertaining to individual Government servant from ‘0001’



G.I., M.F., F.No.1(7)(2)/2003/TA/11, Dated: 7-1-2004 read with O.M.No. 1(7)(2)/2003/TA/67-74, Dated: 4-2-2004



3.running from January to December of a calendar year. The following
illustration may be followed: -


The first Government servant joining service under Ministry of Civil Aviation
under the accounting control of PAO (Sectt.), New Delhi in 2004, shall be
allotted the following PPAN: -Calendar Year Civil
Min.PAO Code Serial Number 2 0 0 4 1 0 4 0 8 6 6 0 0 0 0 1



(i) The Pay and Accounts Officer will maintain an Index Register for the
purpose of allotment of PPAN to new entrants to Government service.
Format of the index register is given in Annexure-VII.



(j) The PAO will return to the DDO concerned, a copy of the statement duly
indicating therein the Account numbers allotted to each individual by 10th
instant. DDO in turn will intimate the account number to the individuals
concerned and also note in the Pay Bill Register.



(k) The particulars of the Government servants received from the various DDOs
will be consolidated by the PAO in the format (Annexure-II-A) and sent to
the Principal Accounts Office by the 12th of every month.



(l) The Principal Accounts Office in turn will consolidate the particulars in the
prescribed format (Annexure-II-B) and forward the same to Central Pension
Accounting Office by 15th instant. The CPAO will feed this information in
their computer database.



(m) The DDOs/CDDOs will prepare separate Pay Bill Registers in respect of the
Government servants joining Government service on or after 1-1-2004. The
DDOs/CDDOs will have to prepare separate pay bills in respect of these
Government servants and will send the same with all the schedule to the PAO
on or before 20th of the month to which the bills relate. Cheque drawing
DDOs may note that hereafter in respect of Government servants joining
service on or 1-1-2004, they will only prepare pay bills and not make
payment. They will send such bills to the Pay and Accounts Offices for precheck
and payment.



(n) The DDO/CDDO will prepare a recovery schedule in duplicate in the
prescribed form (Annexure-III) for the contributions under Tier-I and attach
them with the bay bills. The amount of the Contributions under Tier-I should
tally with the total amount of recoveries shown under the corresponding
column in the pay bill.



(o) The accounting procedure for these deductions is being finalized and shall be
notified shortly.



(p) It may be noted that along with the salary bill for the Government servants
who join service on or after 1-1-2004, the DDO/ CDDO shall also prepare a
separate bill for drawl of matching contributions to be paid by the
Government and creditable to Pension account.



(q) The bill for drawl of matching contribution should also be supported by
schedules of recoveries in form (Annexure-IV).



G.I., M.F., F.No.1(7)(2)/2003/TA/11, Dated: 7-1-2004 read with O.M.No. 1(7)(2)/2003/TA/67-74, Dated: 4-2-2004



4.(r) On receipt of the salary bills in respect of Government servants joining
service after 1-1-2004, PAO will exercise usual checks and pass the bill and
make the payments. After the payment is made and posting done in the
Detailed Posting Register, one set of schedules relating to Pension
contributions will be detached from the bills as done in the case of other
schedules such as GPF, Long-term advances. The schedules will then be
utilized for posting the credits of contributions in the Detailed Ledger
Account of the individual.



(s) The employee’s contributions under Tier-I and Tier-II and Government’s
contribution should be posted in different columns of the individual ledger
account (to be maintained in the format in Annexure-V) and Broadsheet and tallied with the accounts figures as being done in the case of GPF.



(t) These accounts should not be mixed with GPF accounts and these
records/ledger accounts should be independent of GPF accounts maintained
in the case of pre-1-1-2004 entrants.



(u) The PAO will consolidate the information available in the New Scheme
schedules received from the various DDOs and forward the same in a floppy
in the prescribed form (Annexure-VI) to Principal Accounts Office by 12th of
the month following the month to which the credit pertains. Principal
Accounts Office in turn will consolidate the information and send the same in
electronic form to the Central Pension Accounting Office by 15th.



(v) CPAO on receipt of this information from all the Pr. Aos (including the Non-
Civil Ministries) will update its database and generate exception reports for
missing credits, mismatches, etc., which will be sent back to the PAOs
concerned through the Pr. AOs for further action.



(w) Whenever any Government servant is transferred from one office to another
either within the same accounting circle or to another accounting circle,
balances will not be transferred by the PAO to the other Accounts Office.
However, the Drawing and Disbursing Officer should clearly indicate in the
LPC of the individual the unique account number, the month up to which
Government servant’s contribution and Government’s contribution have been
transferred to the Pension Fund.



(x) No withdrawal of any amount will be allowed during the interim
arrangement. Provisions regarding terminal payments in the event of
untimely death of an employee or in the event of his leaving the Government
service during the interim period shall be notified in due course.



(y) Detailed instructions on the interest payable on Tier-I balances shall be issued
in due course.



(z) At the end of each financial year, the CPAO will prepare annual account
statements for each employee showing the opening balance, details of
monthly deductions and Government’s matching contributions, interest
earned, if any, and the closing balance. CPAO will send these statements to
the Pr. A.O. for onward transmission to the DDO through the PAO.
(aa)After the close of each financial year, CPAO will have to report the de4tails
of the balances (PAO-wise) to each Principal Accounts Offices, who will
forward the information to each PAO for the purpose of reconciliation.



The G.I., M.F., F.No.1(7)(2)/2003/TA/11, Dated: 7-1-2004 read with O.M.No. 1(7)(2)/2003/TA/67-74, Dated: 4-2-2004



5.PAO will reconcile the figures of contributions posted in the ledger account
of the individuals as per their ledger with figures as per the books of CPAO.
(bb)After the appointment of CRA and Fund Managers, this office will issue
detailed instructions on transfer of balances to CRA.

Architecture of the New Pension System

..It will have a Central Record Keeping and Accounting (CRA) infrastructure,
several Pension Fund Managers (PFMs) to offer three categories of schemes, viz.,
options A, B and C.

..The participating entities (PFMs and CRA) would give out easily understood
information about past performance, so that the individual would be able to make
informed choices about which scheme to choose.