Union Cabinet has approved number of changes to the National Pension Scheme (NPS), including increasing the government’s contribution, exempting withdrawals from tax, and also exempting up to ₹1.5 lakh of contributions to the scheme from tax.
Changes approved:
Other key features:Mandatory contribution by the Central Government for its employees covered under NPS Tier-I to be enhanced from the existing 10% to 14%.
Providing freedom of choice for selection of Pension Funds and pattern of investment to central government employees.
Payment of compensation for non-deposit or delayed deposit of NPS contributions during 2004-2012.
Tax exemption limit for lump sum withdrawal on exit has been enhanced to 60%. With this, the entire withdrawal will now be exempt from income tax (At present, 40% of the total accumulated corpus utilized for purchase of annuity is already tax exempted).
Contribution by the Government employees under Tier-II of NPS will now be covered under Section 80 C for deduction up to Rs. 1.5 lakh for the purpose of income tax at par with the other schemes such as General Provident Fund, Employees Provident Fund etc.
Implementation strategy and targets: The proposed changes to NPS would be made applicable immediately once time critical decisions are taken in consultation with the other concerned Ministries / Departments.
of beneficiaries: All States/districts will be covered. Approximately 18 lakh central government employees covered under NPS would be benefitted from the streamlining of the National Pension System.
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