Thursday, 4 February 2016

The finance ministry is examining a proposal by the PFRDA to exempt NPS withdrawals from payment of tax


The finance ministry is examining a proposal by the Pension Fund Regulatory and Development Authority (PFRDA) to exempt national pension system (NPS) withdrawals from payment of tax, so as to bring it on par with the employee provident fund (EPF) scheme.

This will provide a level-playing field for the two pension schemes.

"We have made a proposal to the finance minister ahead of the Budget, where exemption of NPS withdrawals from tax is one of the key recommendations. It will be a game-changer for NPS resulting in a substantial increase in the assets under management with more private subscribers coming on board," said a PFRDA official.

The Seventh Pay Commission had also recommended an exempt-exempt-exempt (EEE) status for NPS, to bring it on a par with the EPF scheme in terms of tax-free withdrawals.

The pay panel also pitched for extension of co-contribution incentive by the government beyond 31 December to attract subscribers under Atal Pension Yojana

The government has so far got over one million subscribers on board

Currently, the EPF withdrawals after five years of completion of service are tax-exempt, while premature withdrawals before five years attracts tax ranging between 10 per cent and 34.608 per cent, barring exceptions.

The EPF enjoys 'EEE' status, while NPS accounts have exempt-exempt-taxed status, where any contributions to the schemes and its earnings are not taxed but amount received on withdrawal is taxed.

"There is indeed a case to provide EEE status to NPS, but the matter is still under examination," said a government official.

The finance minister had in his last budget provided employees the option of choosing between EPS and NPS, and a cabinet note for amendment of EPF and MP Act, 1952, has been sent to the law ministry for vetting.

Also, while the Employees' Provident Fund Organisation has been giving a return of 8.25-9.5 per cent to its subscribers, NPS has given a return of 9.2 per cent and NPS Lite has given a compounded annual growth return of 9.68 per cent.

Of the over Rs1,00,000 crore assets under management of NPS, 90 per cent falls under the central and state government schemes.

Meanwhile, the APY scheme got over one million subscribers on board by December. APY guarantees subscribers a monthly pension of Rs1,000, Rs2,000, Rs3,000, Rs4,000, or Rs5,000 in return for the contribution varying from Rs42 to Rs210 per month.

Under the scheme, the government contributes 50 per cent of the subscriber's contribution or Rs1,000 per annum, whichever is lower, to each eligible subscriber account for five years to 2019-20, who joined the NPS before 31 December 2015 and who are not income taxpayers.

Currently, eight pension fund managers manage private-sector funds and only three run by state-owned financial institutions are allowed to manage central and state government funds.

SBI Pension Funds, UTI Retirement Solutions, and LIC Pension Fund manage the government corpus. They also manage the private-sector corpus along with ICICI Prudential Pension Fund Management, Kotak Mahindra Pension Fund, HDFC Pension Management, Reliance Capital Pension Fund and the pension fund incorporated by Birla Sun Life Insurance.

http://www.domain-b.com/finance/general/20160108_exemption.html

2 comments:

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    All India Centre Govt and State Govt Employees who come under NPS and joined after 01.01.2004 should join this group. So that we can unite against new pension scheme.

    This group is all about New Pension Scheme only and to give more and more information about NPS/CPF to Govt Employees of Centre Govt and State Govts.

    ReplyDelete
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