The Government of India is planning to make the National Pension System (NPS) more attractive by announcing several concessions in the interim budget. This initiative is particularly focused on providing increased tax benefits to senior citizens over 75 years of age.
Key Highlights of the Proposed Changes
- The tax exemption limit on contributions and withdrawals for senior citizens in NPS may be increased from the current 10% to 12%.
- The Pension Fund Regulatory and Development Authority (PFRDA) has recently recommended this change to the government.
- The goal is to provide equal opportunities to companies and employers contributing to NPS, similar to the Employees’ Provident Fund Organisation (EPFO).
Long-Term Savings Encouragement
- Experts suggest that for investors over 75 years, tax exemptions could be provided on the interest earned from NPS.
- NPS could be integrated with interest and pension to offer these benefits.
- Additionally, such senior citizens might also be exempted from filing income tax returns.
Current Disparity in the System
- Currently, a 10% tax exemption is provided on basic salary and dearness allowance in NPS, while in EPFO, it stands at 12%.
- If the government approves these recommendations, it would pave the way for private employees to build a substantial retirement fund.
Additional Contribution Exemption Consideration
- There is a demand to include the exemption on additional NPS contributions in the new tax regime.
- Currently, under the old tax system, an additional exemption of INR 50,000 is provided under Section 80CCD(1B), which is not included in the new tax regime.
The proposed enhancements to NPS are aimed at making the scheme more beneficial for senior citizens, especially those over 75 years of age. By increasing tax exemption limits and providing additional benefits, the government is looking to encourage long-term savings and ensure financial security for the elderly. This move is expected to make NPS a more lucrative option for retirement planning