NEW DELHI: The government has made the National Pension System (NPS) more attractive for investors, with the biggest bonanza going to 18 lakh central government employees. The Centre will contribute 14% of basic salary to their pension corpus, up from 10%. The employee’s contribution will remain at 10%, bringing the total contribution to 24%.
Announcing the changes on Monday, finance minister Arun Jaitley said the entire withdrawal at the time of retirement would be tax free.
The NPS was launched in January 2004 for government employees and was opened to private sector employees in 2009.
At present, 40% of the total accumulated corpus utilised for purchase of annuity is tax exempt.
Of the remaining 60% corpus withdrawn by the NPS subscriber at the time of retirement, 40% is tax exempt and 20% is taxable. The tax exemption is now extended to the entire 60%.
Jaitley said the exact date from which these changes would come into effect would be notified soon, adding that normally such changes are made from the new financial year since they require changes in the finance bill.
Sources told agencies the government can start enhanced contribution beginning January but tax benefit would be available from the next financial year.
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