6 SEPTEMBER 2015: Govt accepts OROP

Ø  Fulfilling one of the major election promises of the BJP, Defence Minister Manohar Parrikar announced on Saturday the implementation of the much-delayed one rank, one pension (OROP) scheme for ex-servicemen. However, the protesting veterans rejected the “unilateral” announcement, saying it “dilutes” the accepted definition of several core issues. Mr. Parrikar met representatives of ex-servicemen later, and some understanding has been reached. Despite the huge fiscal burden, given its commitment to the welfare of ex-servicemen, the government has taken the decision to implement the scheme. Mr. Parrikar said 2013 would be the base year for calculation of pension and the scheme would be implemented from July 1, 2014, the earliest date after the government assumed office. Equalisation of pension would be done every five years as against the usual practice of once a decade. By definition, OROP implies uniform pension for personnel retiring in the same rank and with the same length of service, regardless of their date of retirement. “Under this definition, it has been decided that the gap between the rate of pension of current pensioners and past pensioners will be bridged every five years,” he said. This has been the key issue of disagreement between the government and the veterans who wanted an annual revision.

Ø  With the government accepting the recommendation of the Justice A.P. Shah Committee on applicability of Minimum Alternative Tax (MAT) to Foreign Portfolio Investors (FPIs), one controversy has ended. But much-needed clarifications were awaited on issues such as taxation of Participatory Notes (P-Notes), which would help weed out black-money entry into the country.? While accepting the recommendations, the government has decided to make appropriate amendments to the Income-Tax Act, which would clarify that MAT provisions would not be applicable to FPIs not having a place of business or permanent establishment in India, for the period prior to April 1, 2015. P-Notes are overseas derivative instruments (ODIs) issued by FPIs (earlier Foreign Institutional Investors) to overseas investors, who wish to invest in the domestic stock market without registering themselves with the Securities and Exchange Board of India (SEBI). The decision will help in reviving the investor confidence and ensuring clarity of taxation in the hands of the foreign investors.