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Part - IV
a) Gratuity
In addition to the provident fund, workers in both public and private sectors receive a second tier of lump sum retirement benefit known as gratuity. It is paid to the workers who fulfil certain eligibility conditions like a minimum qualifying service period of five years. It is equivalent to 15 day's of final earnings for each years of service completed subject to a maximum of Rs.350, 000. The cost of gratuity is entirely borne by the employer.
b) Public Provident Fund (PPF) Scheme
The Public Provident Fund (PPF) scheme, introduced about three decades ago, is meant to provide unorganised sector workers with the facility to accumulate savings for old age income security. Under the scheme, amounts between Rs. 100 to Rs. 60,000 per annum can be deposited into the PPF account. These investments are eligible for tax rebate under Sec 88 of the Income Tax Act and interest at a guaranteed 11 per cent p.a. is fully tax exempt under Sec 10.
The scheme has poor coverage because of ineffective marketing and the service delivery is grossly inadequate. Being largely urban centric, the scheme is used more as a tax planning vehicle by high-income savers than an old age income security plan. The 11 per cent tax-free return that a PPF investor is guaranteed is equivalent to a 16.8 per cent pre-tax return for a marginal income tax payer.
c) National Social Assistance Programme (NSAP)
In an effort to widen the reach of the social safety net for the aged poor, the central government, in 1995, introduced a more comprehensive old age poverty alleviation program called the National Old Age Pension (NOAP) under the aegis of the National Social Assistance Programme (NSAP). The scheme aims to provide monthly pension to thirty percent of the poorest elderly. This programme provides benefits for poor people above the age of 75 years. Under the programme a pension of Rs. 75/- per month is provided to eligible persons.
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* Contributed by -
Swetha Narayanaswamy,
First Year M.B.A.,
ICFAI Business School, Mumbai.
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