With the new pension system attracting lukewarm response from citizens, interim regulator PFRDA expressed hope that the Budget would provide tax exemption to individuals at the time of entry to encourage them to opt for the scheme.
However, the government might take some more time to provide tax benefits for those opting for NPS at the time of withdrawal, a senior Pension Fund Regulatory and Development Authority (PFRDA) official told PTI.
"Exit stage may take a longer time for examination, but at entry stage (of NPS) we expect to come in the next budget," he said. The regulator has sought tax exemption for individual subscribers at all stages of the pension scheme-- contributions, returns and withdrawal-- in line with other provident fund schemes.
However, there is no notification yet on entry-stage exemption, the official added.
PFRDA further said that the tax exemption issue at entry stage is under the active consideration of the government and expects the Budget to come out with some clarifications on the issue and that will give boost to the NPS.
The NPS was extended to all citizens from May one this year, but evoked lukewarm response with only 400 persons opening pension accounts so far.
"May be with the budget certain clarification will come on the nature of investment in this particular scheme. Once those clarifications come, probably we will get more subsriber joining us," he added.
While contribution, returns and withdrawals under Public Provident Fund (PPF), Employee Provident Fund (EPF) and General Provident Fund (GPF) are exempted from tax, in case of the New Pension System (NPS), these tax benefits are not provided to individual subscribers.
For organisations, tax is exempted at the entry and return stage.
Besides, the PFRDA has also asked the government to bear the cost of maintaining accounts of policy holders under the New Pension System, a move that will further encourage people to opt for the scheme.
Source : business Standard.
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