The Hindu Business Line : Govt retirement schemes for pvt sector employees?

THE Government is considering a proposal to permit retiring employees of private sector companies to participate in the deposit schemes framed for retiring employees of public sector undertakings (PSUs) and Government employees.

The two schemes that are currently under operation for retiring government employees and those of PSUs offer an annual interest of eight per cent. These two small savings instruments offer a tax exemption on the interest earned under Section 10(15) of the Income-Tax Act. Even employees retiring under a voluntary retirement scheme (VRS) are eligible to participate in these two schemes.

Addressing a meeting organised by the Associated Chambers of Commerce and Industry (Assocham) here, the Finance Minister, Mr Yashwant Sinha, justified the 50 basis point reduction in interest rate in this year's Budget. He pointed out that there were two schools of thought on this decision.

While a section felt disappointed that the reduction was curtailed to only 50 basis points and that it had expected 100 basis point reduction, there was criticism that this move would also hurt the retired employees who were relying on such interest income for a living.

"We are now considering a proposal which would allow private sector employees to opt for the deposit scheme that are available to retired PSU and Government employees. There is no reason as to why the private sector employees should not get the benefit of participation," Mr Sinha said.

On the general resentment over the Budget proposal to tax dividends at the hands of recipient shareholders, Mr Sinha said that there was no double taxation in such a treatment. He held that even the earlier system of dividend distribution tax was in a way a form of double taxation.

"Dividend distribution tax is an issue that was inherited by us and its removal was under our consideration for the last three years. We thought that taxing dividend in the hands of those that do not require to pay tax on such income is unfair ab initio and therefore moved it from the company to the shareholder," Mr Sinha said.

He held that corporates should make a case for "no tax on dividends" instead of arguing that the present system would lead to double taxation of dividends.

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