In his Budget speech, finance minister Arun Jaitley focused on various social security measures, intended to place India on the trajectory of a pensioned society from the current pension-less state.

A universal social security system for all Indians, especially the poor and underprivileged, supported by various insurance and other schemes, will be launched under the umbrella of Jan Suraksha. These schemes would utilise the Jan Dhan platform of financial inclusion for collection of premium and dissemination of benefits.

Insurance cover for accidental and natural death risk

A large proportion of India’s population does not have an insurance cover — health, accident or life. With the launch of the Pradhan Mantri Suraksha Bhima Yojana (PMSBY), this will change. The PMSBY will provide accidental death cover of R2 lakh for a premium of R1 per month.

Cover, in respect of both natural and accidental death risks, for those in the age group of 18 to 50, will be provided under the Pradhan Mantri Jeevan Jyoti Bhima Yojana, where a coverage of R2 lakh would be available at a premium of R330 per year.

Pension scheme

Atal Pension Yojana, a defined pension scheme is proposed to be introduced, where the pension would depend on the quantum and the period of contribution. To incentivise people, the government would contribute 50% of the beneficiaries’ contribution. This would be limited to R1,000 per year, for a period of five years, and would be made only where the new accounts are opened before December 31, 2015.
Senior Citizen Welfare fund

A Senior Citizen Welfare fund is proposed to be set up by appropriation of unclaimed deposits in the Public Provident Fund and Employees’ Provident Fund accounts. These funds will be used to subsidise the premium of vulnerable groups, such as old-age pensioners, BPL card holders, small and marginal farmers, etc. A detailed scheme towards this will be issued this month. A scheme for providing Physical Aids and Assisted Living Devices for senior citizens, living below the poverty line would be set up.

Proposed changes in existing social security regimes

ESI to Insurance: Employees are mandatorily covered under the Employees’ State Insurance scheme (ESI), where the salary is below a certain threshold (currently R15,000 per month). It is proposed to provide employees an option of choosing either ESI or a health insurance product recognised by the Insurance Regulatory Development Authority. From a tax perspective, this proposal is supplemented with an enhanced deduction for expenditure on health insurance. Expenditure on health insurance for an individual and the family is eligible for an enhanced deduction of R25,000 against the current level of R15,000. If the insured is a senior citizen, the deduction is enhanced to R30,000. Further, expenditure on health for very senior citizen is eligible for deduction of up to R30,000.

EPF to NPS: Employees with a pay of up to R15,000 per month are covered under EPF. Jaitley has talked of the intent to provide an option of not contributing to EPF to the employees. However, employer contribution to EPF would continue. Further, the employee may be provided an option to choose between EPF contributions and the New Pension Scheme.  NPS, a defined contribution pension scheme, provides a flexible opportunity to individuals to invest in equity/debt/government securities through specified pension fund managers of their choice.

Specific regulations and guidelines for many of the above are expected to be announced separately. With the implementation of the above proposals, India is poised to move towards a pensioned society.

By Saraswathi Kasturirangan

The writer is a director at Deloitte Haskins & Sells LLP