Budget 2016 - news & discussions

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Picklu
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Re: Budget 2016 - news & discussions

Post by Picklu »

The victory here is a loss but some of us will keep our eyes closed. We will continue to ask for high rate of interest from GSEC but that will cause inflation hitting our pocket and then the higher rate of interest will hinder the economy making my situation even worse. But we will proclaim victory. EEE in EPF with 8+% interest!
Gus
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Re: Budget 2016 - news & discussions

Post by Gus »

"Victory" still leaves me confused as to who pushed it in? Jetli? Modi? Babu?

Agree with suraj that this sort of stuff needs better communication. People usually accept pain if they understand why and you show them later gains and you have credibility.

If inc asked for LPG subsidy give up, most would not oblige given the scams from inc.

At this stage, probably leave it alone for this term and tackle it better in next term.
Kakkaji
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Re: Budget 2016 - news & discussions

Post by Kakkaji »

Give the same EEE status to 100% of NPS also. Make the playing field level.
SwamyG
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Re: Budget 2016 - news & discussions

Post by SwamyG »

On a family only whatsapp group, I read that "still full PF cannot be withdrawn... employer contribution which almost equal to employee contribution can be withdrawn only after 58 years.....(this was not presented in the budget, but passed on 16 Feb 2016)"

ITVity types in my family who change companies at least one in a decade (or even less) are pretty disturbed.

What is the scoop on that?

Added: Looks like this question has been asked and answered on page 6 of this dhaaga. Correct?
Last edited by SwamyG on 08 Mar 2016 23:28, edited 2 times in total.
Suraj
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Re: Budget 2016 - news & discussions

Post by Suraj »

Kakkaji wrote:Give the same EEE status to 100% of NPS also. Make the playing field level.
No, GoI chose the opposite. NPS always let you withdraw 40% tax free and the rest 60% is tax free if moved into an annuity. All the EPF announcement did was do the same to EPF too.

However, I have many issues with this. For one, EPF restricts what it invests in - Gsecs that return nominal rate of return matching GoI's measure of CPI. In other words, the entire benefit of tax free gain is constrained by the fact that gains are indexed to official rate of inflation. This makes it a difficult instrument to tax justifiably, because taxation lowers the return to much below the EPF rate.

Ideally, since they prefer to phase out EPF, they should just do that by lowering the contribution threshold, and increasing that for NPS. While uniformity of taxation is a good idea, they are applying that without uniformity of investment profiles. NPS lets you choose between aggressive/moderate/conservative investment strategies, but EPFO does not have that. It provides a fixed but potentially low rate.

However, demanding a higher EPFO rate does not come without side-effects. It comes at the cost of higher inflation. It's that higher inflation that's paying the higher EPFO rate. You cannot have higher EPFO rate and ask for lower inflation too.
nirav
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Re: Budget 2016 - news & discussions

Post by nirav »

Suraj wrote:
Kakkaji wrote:Give the same EEE status to 100% of NPS also. Make the playing field level.
No, GoI chose the opposite. NPS always let you withdraw 40% tax free and the rest 60% is tax free if moved into an annuity. All the EPF announcement did was do the same to EPF too.
What are you doing Suraj San ? You are talking sense ! Sensible talk isnt appreciated nowadays.

As someone earlier mentioned, this EPF move was actually to get a haircut from funds moved from EPF to NPS .. :roll:

Vrudhashram is an acceptable "social security net" for many here .. :roll:
Suraj
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Re: Budget 2016 - news & discussions

Post by Suraj »

Well, I do not wish to mock people for having particular ideas about what to do with their retirement savings. That's their choice. I think the topic is sufficiently complex that there are issues on multiple levels, whether it's the question of taxing EPF when GoI also restricts what it can be invested in, or on the other hand people using EPFs for childrens' marriages and implicitly justifying that as good investments. I don't agree with the concept of taxing EPF, because they don't give users a choice as to what it can invest it. It's a readymade gravy train for GoI too, because it generates consistent demand for G-secs. It's a distortion they themselves imposed. NPS does a much better job of things,and if the goal is to incentivize NPS, then they should simply set a sunset clause for EPF, e.g. contributions will be phased out over the next 5 years and all contributions instead go to NPS accounts.

There's also a tendency to argue in favor of personal self interest while at the same time requiring GoI to implement something that's both in common societal interest AND personal self interest. That sort of thing rarely works out in a way that makes everyone happy. The business of taxation is rarely about screwing everyone equally. Progressive taxation screws the rich relatively more. Flat taxation screws the poor, relatively.

What I do have an issue with is emotional grandstanding, whether it be crude namecalling, or various varieties of 'how dare they touch MY money with their grubby hands' or simply 'NRIs don't know nothing' . You're entitled to be emotional or angry, but please have the maturity to take it out elsewhere preferably offline, then come here and post with a calm mind here. When you use this forum to spout your anger, you are being a selfish oaf - you cause a mess here, incite angry responses from others, and expect yet other people - mods - to clean up behind you. That you're so familiar with this forum is not enough reason for you to treat it with so much contempt.
disha
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Re: Budget 2016 - news & discussions

Post by disha »

Regarding the entire EPF saga., I have a theory.

It would seem that the finance ministry babus wanted to tax the gravy train of EPF - trying to bring inline with NPS and at the same time keep the gravy train hurtling towards buying G-Secs. Also extend out the payments.

However both the FM and PM did not like it, but they can do only so much against the financial bureaucrats. So how do you turn them around? They let the bureaucrats make a decision and when the heat turned against them, the babus went scurrying under cover to the political masters. This is seen from their waffling responses. None too clear. And then the decision was made to withdraw after a request from PM. I mean this occurs only in communist countries where the PM or the President makes a request and the nation gracefully acquiesces. This shows everybody in great light, but in reality PM 'saved the day'. Question is for whom? Of course in future if a bureaucrat steps out of line which has political overtones or ramifications, dark statements will be made like 'the other day the PM saved our collective behinds., this time things may not be that graceful'. And the babus slinker back into their cabins with murmurs but nary a power to affect their own agenda driven change.

NaMo himself has mentioned about controlling the bureaucrats. On the floor of the parliament. In his speeches he mentions how the state bank officials wanted to stall his Jan Dhan yojna, even to the ridiculous length of stating that the bank officials need to work hard and NaMo pointing out that for decades the bank officials had it easy and now complain about hard work! Bureaucratic obduracy was seen when NaMo wanted a separate power transmission for farmers or a reliable 3-phase transmission for residential areas.

Apart from a some BRF posters rants aside and some murmurs outside, I think Modi Sarkar came out as one which listens (win) and in the process got some control over the fin min bureaucrats (win). Modi sarkar could see how far it could go with real reforms. And what are the redlines which needs innovative solutions to cross.

All in all it was a storm in a teacup.
vina
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Re: Budget 2016 - news & discussions

Post by vina »

This entire episode of PF roll back should be a lesson for all Govts (present and future). The days of Command and Control and an imperious govt deciding to run a "we know what is good for you, so sock it up" days are OVER.

The major sins of this episode.

1. Imposed top down in the true traditions of the Govt of India days of old. A bunch of folks sit around, make a terrible decision, and expect it to be rubber stamped.

2. The entire effort was to grab in PERPETUITY the lifetime savings of a SECTION of the population, who are considered easy target (not organised, diffused and unable to get together easily in collective action, and are law abiding.. i.e. the salaried middle class).
While the govts have systematically grabbed their deposits (via SLR) and used it to bring about a bloated and inefficient govt, that is corrupt and doles out patronage to everyone else, but those who contribute, this attempt was egregious.

3. What was so egregious ? Well, the earlier grabs were only for a fixed period. This was an attempt to grab the money in PERPETUITY . The sheer audacity of it was breathtaking. And the sheer MENDACITY accompanying that idea as well . What in essence was the idea ? It was, we grab the bulk of your savings, pay you peanuts for the rest of your life (enforcing poverty/ reduced circumstances on you , private sector folks ALONE) and then, your "heirs" can inherit it (and if they withdraw it, they pay penal taxes as well). Who the hell is the Govt to decide that I want to bequeath anything to my heirs at all ? What if I want to spend every penny I have and go to my maker, just like I was born -- penniless ?

4.And yes, the entire idea was again, to get someone ELSE to finance the "pensionable" society stuff. It is not one pays into it and withdraws it at a later date (either via annuity or even lump sum), but rather, one set of people pay LOT LOT more, and they by their reduced circumstances / enforced poverty finance the others. In short it was a TAX . Mendacious claims of it being otherwise, not withstanding. It looks like a tax, walks like a tax, squawks like a tax, and guess what, it WAS a tax.

5. The public reacted with outrage at the sheer unfairness in many levels (taxed twice, at entry and exit, why only private guys, why NOT the govt employees, why are the govt employees not taxed on their perks , like the private guys are, and why in addition to your taxes which you subsidise the others, should you in retirement as WELL subsidise the others and the blood sucking govt leeches ?)

6. This kind of initiative has to be a part of the deep reforms of the capital markets, which includes wholesale about HOW the govt raises loans , the free pricing of govt debt so that it pays the true cost AND the larger question of allocation of capital to the economy via a free market that makes rational decisions, rather than capital allocated by a bunch of clowns (formerly in the Planning Commission, now in the Finance Ministry) . This would have required a very credible committee to be set up which studied it thoroughly, would have included members from RBI, Govt, Industry, Labour Unions, Private Sector, taxation experts, global best practices, and then opened it out for public discussions and feedback and then legislated it.

7. But NO. The Govt Baboons sitting in the Finance Ministry are omniscient. They know everything, including the size of everyone's shoes , and come up with some idiotic nonsense. For the rank idiocy that has imposed serious setbacks and political costs on a laudable objective and the sheer audacity of trying to grab money in perpetuity via sheer robbery of the wealth of a section of the citizenry, heads SHOULD roll. It HAS to be the Economic Affairs Sec - Shaktikanta Das and the Revenue Secretary (Hasmukh Adhya and the others who penned this). They HAVE to be fired.

8. Best, case, get in some credible person like Deepak Parekh or some credible person with deep industry expertise and knowledge and track record in to head the Finance Ministry and what needs to be fixed , nailed.

9. If not Deepak Parekh, MOVE Suresh Prabhu from Railways to Finance. He is a top class guy, who knows his Finance very well and as the youngest head of Saraswat Bank , he did great things there. Atleast he will be able to call out any nonsense the Baboons dish out and nip it in the bud.
Nitesh
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Re: Budget 2016 - news & discussions

Post by Nitesh »

I am unable to understand this fascination of tinkering with EPF, now we need to have mandatory investment in EPS, I am not sure about EPS, so correct me if I a wrong here. Till now only 1250 pm in employer contribution was going in to it, and maximum pension was fixed at 7500, with increased contribution we will still be stuck with maximum pension of 7500? No clarity on this front.

http://economictimes.indiatimes.com/new ... 334911.cms
Dumal
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Re: Budget 2016 - news & discussions

Post by Dumal »

It can't and won't still be capped when the contributions go up. But it will be complicated how they figure out what level the payout will be. So far it was simply 50% of the last drawn salary for normal cases, but only after 35 yrs of contributions. Will have to wait to see the details...

In any case this is where the chickens come home to roost! Ideally we could have had EPF have a semblance of parity with NPS this year and then move to a stage where employer contributions can be routed to EPF or the NPS and people can slowly graduate to a market- linked self managed retirement fund if they chose to. But with the kind of short-sighted shrill opposition they saw, doubt if they will go back to redefining EPF anymore. Some blame goes to the government also for not communicating the transition better.
SwamyG
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Re: Budget 2016 - news & discussions

Post by SwamyG »

Finance minister Arun Jaitley’s second full-year budget won praise for its commitment to fiscal rectitude. Jaitley ignored calls to pump-prime the economy and stuck to a fiscal deficit target equivalent to 3.5% of gross domestic product (GDP) while boosting spending on infrastructure and rural development in a farmer-friendly budget that sought to ease the pain of farmers hit by two consecutive droughts.
http://www.livemint.com/Politics/GR5CA3 ... at-74.html
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