Finance Minister, Arun Jaitley, declared major benefits to central government employees who avail the National Pension System (NPS) in December 2018. It is expected to help all the central government employees, covered under NPS, in planning their retirement.
National Pension System was launched in 2004 and is managed by Pension Fund Regulatory and Development Authority (PFRDA), open to all aged between 18 and 60. Initially, it was only for government workers and 5 years later in 2009, it was made open to NRIs as well as people from private sectors and unorganized sectors.
Know these about NPS including the new changes introduced:
1. The contribution from the government is raised from 10% to 14% and the investor’s contribution remains 10% of their basic pay.
2. The government has also made NPS withdrawal after retiring completely non-taxable. Earlier, out of the 60% withdrawal allowed, only 40% was tax-free.
3. The benefits are also expected to be extended to the private subscribers.
4. NPS subscribers will now get freedom of choice on the selection of pension fund managers. Also, they will be offered more choice in patterns of investment i.e., debt and combination of debt and equities.
5. NPS has two types of accounts under the scheme – Tier 1 and Tier 2 – the former account is a non-withdrawable account till retirement and the latter is a savings account.
6. Contribution by the central government employees under Tier II account will now qualify for deduction under Section 80C up to Rs. 1.50 lacs, provided there is a lock-in period of 3 years.
7. The government lets you withdraw partially from the compulsory Tier-I account after completing three years from the initial investment date.
8. The government has approved “payment of compensation for non-deposit or delayed deposit of NPS contributions during 2004-2012″ for central government employees.
The new proposed changes in NPS rules including higher NPS contribution will come into effect after the Budget presentation and will cost the government approximately Rs. 2840 crore in the coming financial year.