Budget 2019: Govt proposes raising income tax exemption for NPS subscribers to 60% of corpus; new limit applicable from April 2020

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

Press Trust of India July 05, 2019 19:00:43 IST
Budget 2019: Govt proposes raising income tax exemption for NPS subscribers to 60% of corpus; new limit applicable from April 2020
  • Nirmala Sitharaman proposed to exempt from income tax 60% of the amount received by NPS subscribers on closure of account or opting out of the scheme

  • Currently, up to 40 percent of the total amount payable to an assessee on closure of account or opting out of the Natioanl Pension Scheme, is exempt from the tax

  • The proposed higher exemption limit will be applicable from April next year

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.

Budget 2019 Govt proposes raising income tax exemption for NPS subscribers to 60 of corpus new limit applicable from April 2020

File image of Nirmala Sitharaman. PTI

"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.

Click Here For Latest Update On Union Budget 2019

Updated Date:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Union Budget 2021: Auto dealers' body demands depreciation benefits for individual taxpayers
India

Union Budget 2021: Auto dealers' body demands depreciation benefits for individual taxpayers

In its Budget recommendations, the Federation of Automobile Dealers Associations also said auto dealers should be kept out of annual tax collected at source of 0.1%

Union Budget 2021: Govt must redirect focus on resolving demand-side issue for economic recovery
India

Union Budget 2021: Govt must redirect focus on resolving demand-side issue for economic recovery

Sunil Kumar Sinha of India Ratings warned that even if the supply-side bottlenecks get restored on account of various RBI measures it may soon run into difficulties due to the lack of adequate demand

Union Budget 2021: US business advocacy group urges Nirmala Sitharaman to lower tariff to compete with RCEP
World

Union Budget 2021: US business advocacy group urges Nirmala Sitharaman to lower tariff to compete with RCEP

India had walked out of the RCEP, a 14-member group led by China, as negotiations failed to address New Delhi's outstanding issues and concerns