NEW DELHI: The government may grant tax incentives to the National pension scheme (NPS) in the Union budget 2018, to make the scheme more attractive among to private players.
“NPS needs to be more attractive. For that, it must be treated at par with other retirement saving schemes like PPF and EPF, which enjoy EEE (exempt-exempt-exempt) status. We have already requested the government to grant NPS the long-awaited EEE status. If granted, it will be a big booster for the sector,” Hemant Contractor, chairman, Pension Fund Regulatory and Development Authority (PFRDA), told Express in an interview.
“There is no substitute to pension. Our subscriber base is growing at 25 per cent and we expect the growth momentum to continue for the next 3-4 years. In this fiscal, the overall number of NPS and APY (Atal Pension Yojna) subscribers will cross 2 crore,” contractor said.
The finance ministry is also of the view that NPS should be at par with other pension schemes, said a senior official at the ministry. “This will go a long way in ensuring social security in the country. The ministry is considering the exemption,” the official added.
At present, NPS enjoys partial tax exemption on the maturity amount while the annuities pension post retirement remains fully taxable in the year of receipt.
For instance, if a beneficiary aged 30 starts saving Rs 5,000 a month under the scheme, till the age of 60, the maturity corpus could be nearly Rs 1.14 crore assuming growth rate of 10 per cent per annum. Currently, the beneficiary is allowed to withdraw a maximum of 60 per cent of this amount, which will be Rs 68.37 lakh, out of the Rs 68.37 lakh, only Rs 27 lakh is tax-free. This makes the scheme unattractive to the subscribers.
PFRDA has asked the finance ministry to provide tax-exempt status to the entire corpus. To make the scheme even more attractive, PFRDA had increased the maximum age of joining NPS from 60 to 65 years last year. The regulator has also sought clarity on the option if a subscriber wants to switch from EPFO scheme to NPS scheme. “The government had made an announcement in this regard but there was no clarity on how they are going to do it,” Contractor added.