A trust floated by the State’s transport department to hold pension funds under a scheme launched in 2000, has been reduced to a dud affecting over 34,000 pensioners. The reason: The trust failed to get income tax exemption from the Central Board of Direct Taxes (CBDT).
Had the trust parked money into its account without seeking IT exemption, it would have ended up paying an estimated Rs 300 crore as income tax, according to a report of the Pension Regulatory Committee that was set up to examine the fiasco. CBDT comes under the finance ministry that was under P Chidambaram’s watch at that point in time.
Since the trust was dysfunctional, the pension funds were parked with three different organisations: Employees Provident Fund Organisation, STUs and the State government’s Public Deposit Account.
Had the trust not been a dud, it would have had a total corpus of Rs 1,400 crore now despite regular fund outflow, the panel points out.
“We are trying to get this money to the trust account,” says Arumuga Nainar, deputy general secretary of CITU, who is one of the 12 trustees of the pension fund trust.
“Only after this happens, will the trust actually start functioning,” Nainar adds.
When the crisis figured in the State Assembly in April this year, Transport Minister K N Nehru reportedly assured the House that the problem would be sorted out if the State succeeded in getting the tax waiver. Oh, really?
The committee clearly thought otherwise. “The scheme is not at all viable and sustainable. Even if we get the tax exemption, it will not work,” says J Lakshmanan, one of the 13 members of the panel.
Besides, as early as in 2004, the State government had in a letter to the managing directors of all the seven State Transport Undertakings said it was finding it difficult to implement the pension scheme for retired employees because of nonexemption from income tax.