Social Security Tax

Social Security Tax is a popular concept in the United States of America. The Social Security Tax is a benefit scheme for the employees after their retirement from work.

The social security tax is contributed in two parts - a part of the monthly income of the employee is deducted at source and another part is contributed on a monthly basis by the employer under whom the employee is working. The total sum of money makes up the social security tax. The social security tax benefits are financed with the help of the tax levied on the employee's income. In case of a self-employed person, the contribution for the social security tax is made entirely by the person himself. The social security tax is levied under the norms of the United States Social Security Act of 1935, which was set up for the purpose of providing national social insurance in order to provide economic security to employees in the United States.

In case a person works as an employee in a corporate unit under an employer, the social security tax under deducted at source would be 6.2% of the monthly income or wage of the employee. The employer contributes another 6.2% of the employee's income from his side and the total sum is deposited in the social security tax benefit schemes. Another 1.45% is contributed by the employee and with matching contributions of the employer for the medical tax program.

In case the person is self-employed, he has to contribute 15.30% of his income which is taxable in nature and deposit in the social security tax programs for the first slab of the income which is US$ 97,000. The self-employed person may continue to contribute 2.90% of the taxed income for the medical tax programs if the income is above the first slab which is more than US$ 97,000. The self-employed person has to pay nearly twice the contribution of the employees but they have the option of deducting half of the federal self-employment taxes under the federal income tax.

The social security tax programs are popular in India in the name of Provident Fund. The concept of the Provident Fund is similar to the social security tax programs. Provident Funds are of different types such as Public Provident Fund, General Provident Fund, and Employee's Provident Fund. The General Provident Fund is provided to the employees of the central government, the Public Provident Fund is provided by the State Bank of India, the largest commercial bank in India for the employees of the state government, and the Employee's Provident Fund is also provided by the State Bank of India, for the private sector employees.