"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:
Apart from the above, the FM has proposed certain other social security measures:
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.)