Features of MACPS (Modified Assured Career Progression Scheme)

ACTSWA (REGD.) 

(The Mouthpiece of employees of AEES) 

 Society Regn. No. 1678-2009 GBBSD 

EMAIL ADRESS: actswa@gmail.com

Visitors are requested to mail only legitimate matters concerning the community.

Features of MACPS (Modified Assured Career Progression Scheme) 

REFERENCE: 1. DOPT OM No: 35034/3/2008- Estt(d) dated 19/05/09.

2. RBE No: 101/2009 (no.pc-v/2009/acp/2) dated 10/06/09.

3. PBC No: 112/2009 (no. p(pc)524-pc/voliv) dated 18/06/09.

(Railway Board has sought for clarifications to DOPT – elucidation awaited)

The scheme would be operational from 01.09.08. In other words, financial upgradations as per old ACP of October 1999 would be granted till 31.08.08. (Para 8) A Screening Committee would be constituted and follow a time schedule to meet twice in a financial year preferably in the month of January (April to September) and of July (October to March).( (Para 6). 

Financial upgradation under MACPS is purely personal to the employee and staff shall have no relevance to his seniority position. As such no stepping up of pay in the PB & GP would be admissible with regard to junior getting more pay than the senior on account of pay fixation under MACPS.(Para 9 & 20).

No past cases would be reopened. The differences in pay scales on account of grant of financial upgradations under old ACP and new MACP within the same cadre shall not be construed as anomaly (Para 10). 

There shall be three financial upgradations under MACPS counted from the direct entry grade on completion of 10, 20 and 30 years. (Para 1 of Annexure). All cadres including Group A (excluding organized Gr.A services) are eligible for grant of MACP. (Para 3). 

The financial upgradation under the MACPS would be admissible up to the highest grade pay of 12,000 in PB-4. (Para 3 of Annexure).

The pay shall be raised by 3% of the total pay in the pay band and the grade pay drawn before such upgradation. There shall be no further fixation at the time of regular promotion if it is the same grade pay as granted under MACPS. Financial up gradation will be in next higher grade pay in the hierarchy of Grade Pay and not in the promotional hierarchy (as it was earlier). (Para 4). 

An employee who completes 10 years of service in a particular grade will qualify for grant of MACP. Service rendered in a lower grade will not be counted for grant of MACP after completion of total qualifying service of 10 years. For example if an employee gets regular promotion to the next grade after completion of 5 years of service in a particular grade, he will have to wait till the completion of 15 years of regular service for 2nd MACP. Likewise 3rd MACP for him will be given after completion of 25 years of regular service (Illustration 1 Para 28 (i) and (ii)). However, after 1st regular promotion or 1st MACP, completion of 10 years of regular service in a grade or total qualifying service of 20 years or 30 years whichever falls earlier will be the milestone for grant of next MACP (Illustration 3 Para 28 B). 

The service rendered by the existing employees prior to implementation of the MACPS viz., prior to 1.9.2008, will also be taken in to account for calculating the 10, 20 and 30 year milestones for granting MACP.(Para 9 of Annexure). 

Similarly, employees who were granted financial upgradation under previous ACP scheme i.e., prior to the introduction of MACPS with effect from 1.9.2008, will be eligible for financial upgradation under MACPS after completion of 20 years and 30 years of service, irrespective of regular promotion given to them if any, between their 10 to 20 years of service or between 20 years and 30 years of service. For example if an employee was given 1st ACP under old ACP Scheme after completion of 12 years of service and a regular promotion after completion of 18 years of service, he will be eligible for 2nd MACP after completion of 20 years of service. (Para 9 of Annexure and Illustrations in Para 5 and Para 28). 

Promotions earned /upgrading granted under the ACP scheme in the past to those grades which now carry the same grade pay due to merger of pay scales /upgradations of posts recommended by the Sixth Pay Commission shall be ignored for the purpose of granting upgradation under MACPS.(Para 5 of Annexure). 

Financial benefit an employee gets as a result of pay fixation during MACP will be 3% of basic pay (pay in pay band plus the grade pay before MACP) and the difference in Grade pay before MACP and grade pay after MACP.Option for fixation of pay is also available. (Para 4 and 7 of Annexure). 

If an employee gets a regular promotion to a grade which carries same grade pay which he is receiving now after grant of MACP, no further pay fixation will be allowed at the time of said regular promotion. If an employee gets a regular promotion to a grade which carries higher grade pay than the grade pay he is receiving now after grant of MACP, no further pay fixation will be allowed on account of the fact that his pay would have been fixed at the time of grant of MACP itself. However, difference in the grade pay he is getting now and the next grade pay in the hierarchy will be allowed as monetary benefit at the time of promotion. (Para 4 of Annexure). 

In the case of employees who have been either promoted or given ACP prior to 6CPC implementation from a grade to another grade, pay scales of which have been merged now after 6CPC implementation, the said promotion or ACP shall be ignored and those emplyees are to be considered for financial upgradations equivalent to the number of milestones they have completed viz., 10 years , 20 years and 30 years milestones as the case may be prescribed in the MACPS for financial upgradations. (Para 5 and illustration thereof). 

In cases where ACP was granted as per previous ACP scheme, but whereas after 6CPC implementation the next higher post which the employee got through ACP has been upgraded with higher grade pay, the pay of such employees in the revised pay structure will be fixed with reference to the higher grade pay granted to the post. To illustrate, in the case of an employee, who was granted 1st ACP in old ACP scheme to the grade which carried the pre-revised scale of Rs.6500-10500 corresponding to the revised grade pay of Rs.4200 in the pay band PB-2, he would now be granted grade pay of Rs.4600 in the pay band PB-2 consequent upon upgradation of the post to the grade pay of Rs.4600 in PB-2. However, from the date of implementation of the MACPS viz., from 1.9.2008, all the financial upgradations under the Scheme should be done strictly in accordance with the hierarchy of grade pays in pay bands as notified. (Para 6.2 of Annexure). 

Grade Pay of Rs.5400 in PB-2 and Grade pay of Rs.5400 in PB-3 are two different Grade Pay for the purpose of MACP (Para 8.1 of Annexure1 to MACP Order dated 19.05.09.) 

Bench Mark (CCR/ACR Gradings) is “Good” up to GP 6600 thereafter is should be “Very Good”. (Para 17 of Annexure1 to MACP Order dated 19.05.09). ‘Regular Service’ for the purpose of MACPS shall commence from the date of joining of a post in regular basis either on direct recruitment or on absorption / reemployment basis. (Para 9 of Annexure1 to MACP Order dated 19.05.09). If financial upgradations will not be allowed under MACPS after 10years due to DAR proceedings, this would have consequential effect on the subsequent financial upgradations. (Para 15 of Annexure1 to MACP Order dated 19.05.09). On grant of financial upgradations under MACPS, there shall be no change in designation, classification or higher status. (Para 16 of Annexure1 to MACP Order dated 19.05.09). 

If a regular promotion has been denied by the employee before becoming entitlement of financial upgradation, no financial upgradation shall be allowed. However financial upgradation will be allowed due to stagnation and subsequently refuses the promotion. (Para 25 of Annexure1 to MACP Order dated 19.05.09). 

Decoding the direct tax code

ACTSWA (REGD.) 

(The Mouthpiece of employees of AEES)

 Society Regn. No. 1678-2009 GBBSD

 EMAIL ADRESS: actswa@gmail.com

Decoding the direct tax code

The proposed Direct Tax Code is a combination of major tax relief and removal of most tax-exempted benefits. It is expected to usher in a new tax regime of transparency and greater compliance writes Dilip Maitra. 

When archaic rules have to be replaced with new ones, the changes must be dramatic and path breaking. This is what Union Finance Minister Pranab Mukherjee conveyed to all taxpayers when he introduced the draft Direct Tax Code (Tax Code) last week. The Tax Code, now open to public debate, will be introduced as a Bill in Parliament’s winter session. If passed, it will become the newIncome Tax Act, replacing the existing four decade old IT Act of 1961. The new IT Act will come into force from April 1, 2011. 

In the foreward to the Tax Code Mukherjee explains that the aim is to eliminate distortions in the tax structure, introduce moderate levels of taxation, expand the tax base, improve tax compliance, simplify the language and lower tax litigations. Initial analysis shows that most of these objectives are achievable by tweaking of some provisions. 

Talking to Deccan Herald, KPMG Executive Director Personal Taxation, IT & ESOP Vikas Vasal said “The new proposals are in the right direction. They will simplify regulations and reduce unnecessary litigations significantly.”

Agreed Bangalore Chamber of Industry & Commerce (BCIC) President K R Girish. “The Code is a completely new law and not an amendment of the existing Income Tax Act. This is a commendable change as one has always experienced tinkering of existing laws, ” observes Girish.

Major gains for individuals

What do the major changes proposed in the Tax Code look like? Personal income tax, almost all salaried persons will agree, in our country is one of the highest in the world. More open and honest an employer is in terms of disclosing remunerations, worse it is for the employees because taxable income goes up. The present system thus rewards dishonesty and non-disclosure of income by way of lower tax. The Tax Code will try to address these issues by significantly lowering income tax and by disallowing all tax-free perks. It proposed exemption of income tax on specified savings up to Rs 3 lakh a year as against the present deduction limit of Rs 1 lakh for all types of savings under 80C of the IT Act. The catch, however, is that a few long term investments like public provident fund, employer’s provident fund, insurance premium in pension (annuity) schemes, Post Office National Savings Scheme etc will be eligible for tax exemption.

But contributions to fixed deposits, interest and principal payment on housing loans, educational expenses of dependents, and a host of other forms of savings will not qualify as eligible for tax savings. The thrust, clearly, is to induce long term savings for future needs.

The Tax Code also raised income tax slabs significantly, lowering the tax burden on individuals. The draft proposed exempting the general tax payer from paying tax for income up to Rs 1.60 lakh a year. 

According to the proposal, a tax payer will pay at the rate of 10 per cent for income above Rs 1.60 lakh and up to Rs 10 lakh, at 20 per cent on income between Rs 10 lakh and Rs 25 lakh and at 30 per cent for income beyond Rs 25 lakh.

At present, while the basic exemption limit remains at Rs 1.60 lakh a year, the limit for tax slabs are much lower — one pays 10 per cent tax on income ranging between Rs 1.60 lakh and Rs 3 lakh, 20 per cent between Rs 3 lakh and Rs 5 lakh and 30 per cent beyond Rs 5 lakh. 

Thus, for an individual with taxable income of Rs 10 lakh a year tax payment will drop from Rs 1.68 lakh to Rs 51,000, a net annual saving of Rs 1.17 lakh. The exemption limit for women and senior citizens will continue to be Rs 1.90 lakh and Rs 2.40 lakh, respectively. 

Not without pains

If the finance minister is for giving major relief to tax payers, he will also make sure that there aren’t many avenues to avoid taxes. So, as a rider, the Tax Code proposes to add all perquisites enjoyed by a tax payer to income for the purpose of tax calculations. In other words, allowances like leave travel, furnishings, entertainment expenses, conveyance, medical etc, will be added to income.

Similarly, the tax treatment for post-retirement benefits may prove to be a major dampener. Money saved in specified instruments like PPF and PF for getting tax exemption will become taxable when they are withdrawn later. 

These investments, when accrued, were earlier exempted from tax. The Tax Code says that under the Exempt Exempt Tax (EET) system all withdrawals will attract tax because the amount withdrawn will be treated as part of the income for that year. 

But in the Tax Code it is unclear if the employee’s contribution to PF and PPF will be taxed at the time of withdrawal. KPMG’s Vasal says that this is an anomaly that needs to be corrected. He believes that only the employer’s contribution and interest accrued to the account will be taxed. 

Though taxing financial gains available after retirement will pinch the retired people, Vasal is of the view that the proposal is equitable as income is liable to be taxed at least once.

However, as a relief to senior citizens, tax exemption limits for them should be raised to Rs 5 lakh per annum instead of Rs 2.40 lakh at present. The Tax Code, however, specified that the tax exempt status currently available to withdrawals would continue to apply to amounts accumulated in post-retirement savings schemes like PPF, EPF, etc, up to March 31, 2011. Money that accrues from April 1, 2011 will be taxed on withdrawal.

Wealth tax benefits

The proposed Tax Code has sought to make major changes in wealth tax calculations and rates. 

The threshold limit for wealth tax will be raised to Rs 50 crore from the present Rs 30 lakh and the tax rate was reduced from 1 per cent to 0.25 per cent. 

But, in a smart move, to expand the scope of taxation the Tax Code included financial assets like shares, corporate bonds, fixed deposits, etc in wealth tax. The valuation of these assets will be done at cost or at market price, whichever is lower. In case of capital gains tax too, the Tax Codeproposed some sweeping changes. It has done away with the present system of short-term and long-term capital gain tax, and replaced it with a uniform structure and gains will be taxed at the marginal tax rate as applicable to the tax payer. The implications of these changes are clear: The period of holding has no bearing on the tax payable and bigger investors will be taxed at higher rates than the smaller ones. 

A mixed bag

For the corporate world, the proposed reduction in the tax rate to 25 per cent from the existing 30 per cent is certainly good news and will help lowering the tax burden of India Inc in a big way. But at the same time the Tax Code proposes to do away with many exemptions that help lowering the tax. In a significant policy change, the Tax Code plans to discontinue all profit linked incentives for area-based investments like setting up plants in a backward area or in the north-east with investment-linked incentives in specific sectors like infrastructure, power, exploration and oil production etc. 

Moreover, under the new proposal, tax holiday will not be for a specific period, as is the case now, but will be equal to all capital and revenue expenditure barring land, goodwill and debts. 

Once a firm recovers the permitted investments and profits will be taxed. This change is aimed at incentivising capital formation in critical areas and remove incentives to shift profits from the taxable unit to the exempted unit. 

On the mat

The Tax Code has also proposed changes in the calculation of minimum alternate tax (MAT) payable by corporates. MAT will now be levied at 2 per cent of the value of gross assets of a firm in case of all companies except for banks which will pay tax at 0.25 per cent. This shift in MAT from book profits to gross assets is aimed at encouraging optimal utilisation and increased efficiency of assets. 

But Ernst & Young Partner- Tax & Regulatory Services, Sudhir Kapadia feels that this proposal seems to run counter to the objective of encouraging of capital investments for productive growth. Vasal of KPMG also of the view that changes in MAT rule will cause hardship to loss making companies as they will have to pay tax on assets. 

Carrot and stick

If the Tax Code is generous in giving relief to tax payers, be sure, it will also make life miserable for those who evade tax through fraudulent means. As the Tax Code prescribes stiff penalties and prosecution for non-compliance with the tax laws, it proposes that every tax offense under the Code will be punishable by both imprisonment and fine. 

Apart from defaulters, the Tax Code proposes to punish tax consultants who help in tax evasion. It gives sweeping powers and blanket protection to Income Tax officials for initiating court proceedings on matters relating to tax offences. 

Direct Tax code : The Gains and the Pains

PERSONAL TAXATION

Manintains tax exemption at Rs.1.60 lakh income a year

10 per cent tax income Rs.1.6 to 10 lakh

20 per cent tax on income over Rs.10 lakh upto Rs.25 lakh

30 per cent tax on income beyond Rs.25 lakh

All perks and allowances will be added to income for taxation

Savings up to Rs.3 lakh will be exempted from income for taxation

Withdrawals from PF, PPF etc will be taxed

Wealth tax limit raised to Rs.50 Crore from Rs.30 lakh

Financial securities like shares brought under wealth tax.