Fund industry hails proposal for tax benefit on NPS scheme

Mumbai: Even as the pension fund industry waits eagerly for any possible changes on tax benefits on pension investment in the Budget proposals, the industry has hailed the existing proposal to provide tax benefit on 40 percent of withdrawal amount at the maturity of any NPS scheme.[caption id=“attachment_2649448” align=“alignleft” width=“380”]  Counting the pension. Reuters[/caption] It is for the first time that government has allowed any tax benefit to NPS in the form of Budgetary proposals. As of now, while the PF money enjoys EEE (exempt, exempt, exempt) status, NPS withdrawal falls under the category of EET (exempt, exempt, tax). So, while the government’s decision to tax 40 percent withdrawal under PF comes as a taxing step for EPFO, it has come as a bonanza for the pension fund industry as it hopes that the move will help increase investment coming under NPS. “We are happy with the government’s decision to levy tax on 60 percent withdrawals under NPS, and thus keeping the remaining 40 percent free from tax. Earlier, the entire amount was taxable. Now they have exempted 40 percent which will surely help increase the NPS investment,” PFRDA chairman Hemant Contractor told PTI. He informed that the present size of NPS was at Rs 1,15,000 crore and it was likely to increase further with the Budgetary proposals, without giving any further details. The retail portion in NPS is currently estimated at Rs 4,600 crore. Giving details about the ongoing Atal Pension Yojna, Contractor said that “as many as 22 lakh accounts have already opened under APY so far and we have already mopped up Rs 400 crore under the scheme until now.” As of now, there are seven players which are managing the NPS fund. They include SBI, LIC, ICICI, HDFC, Reliance and Kotak. All of them, except LIC, are selling retail NPS too. “It’s a good move by the government to keep 40 percent of withdrawals under NPS tax free as it will definitely give a boost to the NPS investments. But, in case the government brings PF investment under EEE category, then NPS must also be treated at par to make it attractive,” HDFC Pension’s chief executive Sumit Shukla said. HDFC is having AUM of Rs 300 crore under retail NPS and it is expecting to close the current fiscal at Rs 350 crore under retail NPS, he said. SBI Pension also feels that it’s a good move by the government. “Even though we are waiting for the clarification to come from the government, we do believe that it was a smart move to levy tax on 60 per cent of withdrawals only under NPS. Real intention of the government seems to be making India a pensioned society,” SBI pension chief executive Shailendra Kumar said. PTI