1. 7th Pay Commission hike bonanza: Government employees should invest in equity & debt MFs; also look at PPF

7th Pay Commission hike bonanza: Government employees should invest in equity & debt MFs; also look at PPF

7th Pay Commission recommendations have been given an approval by the Narendra Modi government, and that means that over 1 crore government employees have a lot of cash in hand.

By: | Updated: June 30, 2016 2:08 PM
7th pay, 7th pay commission, 7th pay approved, central govt 7th pay, Modi govt 7th pay 7th Pay Commission hike: Where should they (government employees and pensioners) invest this in-hand surplus? (Reuters Photo)

7th Pay Commission recommendations have been given an approval by the Narendra Modi government, and that means that over 1 crore government employees are now going to find themselves with lump sum cash, given the arrears that will be doled out. Additionally, with increased monthly salary, the disposable income will go up.

Where should they (government employees and pensioners) invest this in-hand surplus? It all depends on the time-frame that is being eyed, says Naveen Kukreja, CEO & Co-founder of Paisabazaar.com.

The first and the foremost thing that I would suggest is that government employees should use the arrears to pay off any outstanding loans and liabilities, Naveen Kukreja tells FE Online. “If there are no outstanding loans then the investment options should be chosen according to the time period for which you are willing to lock your money in,” he adds.

Kukreja advices, “Equity MFs can be looked at if you have a horizon of over 3 years. These will give you 10% plus returns which any other option would not give in that time frame.”

Also read: 7th Pay Commission: Investment tips and advise for government employees

However, if the investment time is less than three years, Kukerja feels that debt MFs are “great options”. “These (debt MFs) are taxation friendly and you can earn anywhere between 7.5% to 9.5% on post-tax basis,” he says.

For those who are not comfortable in investing in equities, Kukreja suggests Public Provident Fund (PPF). “PPF would be the best option for you, if you don’t want to take the risk of putting your money in equities. PPF will earn over 8% return,” he says.

Kukreja also feels that after the 7th Pay Commission hike, some individuals will move into the higher tax bracket and he pitches for ELSS and PPF as good investment bets under Section 80C.

On Wednesday, Cabinet chaired by PM Narendra Modi approved the implementation of the recommendations of 7th Central Pay Commission (CPC) on pay and pensionary benefits. It will come into effect from January 1, 2016.

The Cabinet also decided that arrears of pay and pensionary benefits will be paid during the current financial year (2016-17) itself.

The recommendations will benefit over 1 crore employees. This includes over 47 lakh central government employees and 53 lakh pensioners, of which 14 lakh employees and 18 lakh pensioners are from the defence forces.

Government employees and pensioners will get a 2.5 times hike in basic pay and pensions under the 7th Pay Commission recommendations that will cost the exchequer annually Rs 1.02 lakh crore

The minimum pay has been increased from Rs 7000 to Rs 18000 per month. Starting salary of a newly recruited employee at lowest level will now be Rs 18000. At the highest level i.e. Secretary, it would go up from Rs 90,000 to Rs 2.5 lakh. For Class 1 officers, the starting salary will be Rs 56,100.

  1. Murali Nagaraj
    Jun 30, 2016 at 3:51 pm
    oh sure!! then who is going to pay our income tax?? the government hasn't made any changes to tax slab!!! it has only increased and introduced more taxes and cesses
    Reply

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