New Delhi: Finance Minister Nirmala Sitharaman Friday proposed to exempt from income tax 60 percent of the amount received by subscribers of National Pension System on closure of account or opting out of the scheme.
Under the existing provisions of the Income Tax Act, any payment from the NPS Trust to an assessee on closure of account or opting out of the pension scheme, up to 40 percent of the total amount payable, is exempt from the tax.
"With a view to enable the pensioner to have more disposable funds, it is proposed to amend the said section (10 of the Act) so as to increase the said exemption from forty percent to sixty percent of the total amount payable to the person at the time of closure or his opting out of the scheme," said a Budget document tabled in the Parliament by the minister.
The proposed higher exemption limit will be applicable from April next year.
The minister also proposed to separate the NPS Trust from regulator Pension Fund Regulatory and Development Authority (PFRDA) in order to address issues over conflict of interest.
The PFRDA implements and regulates the National Pension System (NPS) and Atal Pension Yojana (APY) through various intermediaries, including the NPS Trust.
The matter of conflict of interest arises as PFRDA is the regulator of the pension sector in India, at the same time it runs pension schemes such as NPS and APY.
"Keeping in view the wider interest of the subscribers and to maintain arm's length relationship of the NPS Trust with PFRDA, steps will be taken to separate the NPS Trust from PFRDA with appropriate organisational structure," the minister said in her Budget speech.
The trust was established by the PFRDA for taking care of the assets and funds under the NPS.
The proposal to separate the two job roles was under consideration for last few years.
APY, mainly targeting the unorganised sector employees, offers five slabs of pension from Rs 1,000-5,000 per month upon retirement.
Employees in the age bracket of 18-40 years can sign up for an APY account.
The NPS is a voluntary, defined contribution retirement savings scheme for government employees as well as for those working in the private sector.
The Budget document further said that in order to ensure that the Central government employees get full deduction of the enhanced contribution, it is proposed to increase the limit from 10 to 14 percent of contribution made by the government to the account of its employee.
Updated Date: Jul 05, 2019 19:06:33 IST