"The local policy of this system does not permit you to logon interactively" Solved

To resolve this issue, add allowed users to the Remote Desktop Users list:

1. Click Start, point to Settings, and then click Control Panel.
2. Double-click System, and then on the Remote tab, click Select Remote Users.
3. Click Add type in the user account name, and then click OK.
   
   If you are adding more than one user name, use a semicolon to separate the names.

Note: Adding users to the Remote Desktop Group requires that you are logged on through an administrator account.

Also, make sure that the Remote Desktop Users group has sufficient permissions to log on through Terminal Services. To do this, follow these steps:

1. Click Start, click Run, type secpol.msc, and then click OK.
2. Expand Local Policies, and then click User Rights Assignment.
3. In the right pane, double-click Allow logon through Terminal Services. Make sure that the Remote Desktop Users group is listed.
4. Click OK.
5. In the right pane, double-click Deny logon through Terminal Services. Make sure that the Remote Desktop Users group is not listed, and then click OK.
6. Close the Local Security Settings snap-in.

Fix it Utility

To fix this problem automatically, click the Fix it button or link. Click Run in the File Download dialog box, and follow the steps in the Fix it wizard.

Microsoft Fix it utility Downloading Link  50570

Notes

• Type the user account in the Users box during the installation of the Fix it solution.
• To add a domain user account to the local Remote Desktop Users group, use the following format:
  Domain\Username
• To add a local user account to the local Remote Desktop Users group, use the following format:
  Username or .\Username
• To add multiple user accounts to the local Remote Desktop Users group,use the semicolon(;) character as the separator.For example:
  Username1;Username2
• This wizard may be in English only. However, the automatic fix also works for other language versions of Windows.
• If you are not using the computer that has the problem, save the Fix it solution to a flash drive or a CD and then run it on the computer that has the problem.

Thanks
R.karthikeyan