Investment In NPS Made Lucrative: Government Contribution Increases To 14 Per Cent; Gets Same Tax Sop As PPF, EPF

The central government’s contribution to the National Pension Scheme (NPS) will be raised to 14 per cent from the current ten per cent, CNBC TV-18 reports, citing Union Finance Minister Arun Jaitley. However, there will be no change in the employee contribution into the NPS, as it will remain unaltered at ten per cent.

In terms of tax treatment, the exempt- exempt- exempt (EEE) status ensures the NPS will be on the same level as the Employees' Provident Fund (EPF) and Public Provident Fund (PPF), the report adds. The Pension Fund Regulatory and Development Authority (PFRDA) has been seeking this change for about a decade.

The report added that the cabinet has furthered cleared five changes in the NPS to enable an EEE tax status which also means that 60 per cent of withdrawals from the NPS become tax-free.

Further, savings under the NPS will be eligible for the 80C tax deduction benefit. Under this section, a deduction of Rs 1.5 lakhs annually during the time of return filing.

Government employees have an option to select a mix of debt-equity for NPS investment. The latest changes will be effective from the next fiscal year, with the exact date of effectiveness to be notified later.