Pension fund regulator (PFRDA) announced that it will propose to the government to make employers’ contribution of 14 percent under the NPS, tax-free for all the categories of subscribers in the upcoming Budget, chairman Supratim Bandyopadhyay confirmed. From April 1, 2019, employers’ contribution of 14 percent in pension under the National Pension System (NPS) scheme for central government employees was made tax free.
“We may propose things like 14% contribution by employers to be made tax free to all. Currently, it is given only to the central government employers. So we are requesting the government to give it to all the employers, whether it is state governments or other corporate entities so that subscribers across the board can get this benefit,” Bandyopadhyay told in a statement.
Bandyopadhyay mentioned that the states are asking for the 14% tax benefit to be accredited to state government employees as well. He mentioned that some state governments have written to them requesting the same.
The Pension Fund Regulatory and Development Authority (PFRDA) also plans to request the government to extend the benefits of tier-II NPS account as tax-free for all its subscribers, which was recently granted to the central government employees.
“There is this Tier-II NPS account which was made tax free exclusively for the central government employees recently. So there also, we would request the government to give the facility to all the subscribers. In the tax-free tier-II account we are keeping a lock-in period of 3 years because you are getting the tax-free status…And we want it to be extended to all the other employees. A tier-II account under the NPS is not a compulsory one, one can have it along with the tier-I account, the benefit with tier II account is that it can be withdrawn immediately, ” he added.
The Finance Ministry last month, had discontinued the exercise to prepare the Budget for 2021-22 when the urgency to revive the economy hit by the COVID-19 arrived.
The 2021-22 budget, which is likely to be presented on February 1, will be crucial for the country’s economy since it will have to deal with the impact of the pandemic which has affected all the economy’s segments, including revenue collection, disinvestment, expenditure, exports and food prices.
Administered by PFRDA, NPS is a voluntary, defined contribution retirement savings scheme designed to enable the subscribers to make better decisions about their future requirements. There are two types of NPS accounts — tier-I and tier-II.
While tier-I is a non-withdrawable permanent retirement account into which the gains are deposited and invested as per the wishes of the subscriber, Tier-II account is a voluntary and withdrawable account which is permitted only when there is an active tier-I account. The withdrawals from the tier-II account are permitted as per the needs of the subscriber as and when they claim it.
