Budget 2024: The government is considering measures to make the National Pension System (NPS) more attractive, particularly for senior citizens over 75 years.
The Pension Fund Regulatory and Development Authority (PFRDA) has requested “parity” with the Employees’ Provident Fund Office (EPFO) in terms of tax concessions for contributions by employers. Some announcements in this regard are expected to be made in the interim budget, which Finance Minister Nirmala Sitharaman is anticipated to present on February 1.
Currently, there is a disparity in employers’ contributions to building the corpus for employees, with contributions up to 10 per cent of basic salary and dearness allowances being exempt from tax for NPS contributions, while the same is 12 per cent in the case of EPFO.
To encourage long-term savings through the NPS and alleviate tax burdens for senior citizens over 75 years old, Deloitte’s budget expectations suggest making the annuity portion of the NPS tax-free for holders over 75. Additionally, NPS can be included along with interest and pension to ensure that senior citizens over 75 do not have to file returns if they have NPS proceeds.
Currently, the lump-sum withdrawal of 60 per cent from NPS is tax-free. There is also a demand to provide tax breaks for NPS contributions under the new tax regime. Under the existing provisions, an individual’s contribution of up to Rs 50,000 to the NPS is eligible for deduction under Section 80CCD (1B) in the old tax regime but not under the new tax regime. This is in addition to the Rs 1.5 lakh tax relief provided under Section 80C in the old tax regime.
Concerning government employees, a committee was set up last year under Finance Secretary T V Somanathan to review the pension system and suggest improvements. The report of the panel is still awaited, and it is expected to provide recommendations on whether changes are warranted in the existing framework and structure of the NPS for government employees to enhance pensionary benefits. The suggestions will consider fiscal implications and overall budgetary considerations to maintain fiscal prudence.
(With PTI inputs)
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