"Social Security means that Government, which is the symbol and representative of society, is responsible for fixing a minimum standard of living for all its citizens."~ GHD Cole, Social Scientist
India did not have a universal social security system until now. Accordingly, the finance minister (FM), while presenting his maiden full Budget 2015-16, emphasised the need for having the same.
At present, the Indian social security system provides retirement and insurance benefits to those working in factories and other establishments covered by social security schemes. The large number of people working in the unorganised sector do not get an opportunity to participate in these schemes.
The FM has announced a three-tier Social Security Scheme:
- Pradhan Mantri Suraksha Bima Yojna: It will cover accidental death risk of Rs 2 lakh for a nominal premium of Rs 12 per year.
- Atal Pension Yojana: The scheme will provide defined pension to individuals depending upon the amount and period of contribution. In order to encourage more people to opt for this scheme, the government has proposed to contribute 50% of beneficiaries' premium limited to Rs 1,000 each year, up to five years, in new accounts opened before 31 December 2015.
- Pradhan Mantri Jeevan Jyoti Bima Yojana: This scheme will cover natural and accidental death risk of Rs 2 lakh. The yearly premium will be Rs 330 (less than one rupee per day) for age group 18-50.
Apart from the above, the FM has proposed certain other social security measures:
- Senior Citizen Welfare Fund: The FM has proposed to create a senior citizen welfare fund by utilising unclaimed PPF and EPF deposits.
- Small savings scheme for welfare of girl child: The Sukanya Samriddhi Account Scheme has been introduced. Investments in this scheme are eligible for deduction under Section80C of the Income Tax Act 1961 ('the Act').
It is proposed to give employees an option to choose either Employee Provident Fund (EPF) or NPS, and employees with income below a certain level will be given an option to contribute to EPF. The employee will also have an option of choosing either the ESI or a health insurance product recognised by the Insurance Regulatory Development Authority.
Requirement to deduct tax at source under Section 192A of the Act on PF withdrawals where the period of continuous service is less than five years has been introduced. To simplify the process, pre-mature withdrawal of provident fund is to be subject to withholding tax at 10% provided the withdrawal amount is more than Rs 30,000. Employees can, however, file self-declaration in Form 15G/H for non-deduction of tax under Section 197A of the Act. These provisions are effective from 1 June 2015.
Clearly, this Budget has focussed on developing a robust social security system, which has not been touched for a while. The emphasis on this measure is of prime importance and the fruits of the same will need to be seen in the times to come.
(The article is authored by Poorva Prakash, Director, and Tarun Garg, Deputy Manager, Deloitte Haskins & Sells LLP.)