NEW DELHI: With an eye on the general elections, the Union Cabinet on Monday approved a slew of measures under the National Pension Scheme (NPS), increasing the Centre’s contribution to 14 per cent of the basic salary from 10 per cent earlier, and making the withdrawal from the corpus tax-free.
According to the finance ministry, it will cost the exchequer Rs 2,840 crore in the current financial year.
The move, which is set to benefit around 36 lakh subscribers, including approximately 18 lakh Central government employees covered under NPS. Currently, those who entered Central government service on or after January 1, 2004, are covered by NPS. No wonder the move will provide a massive boost to the NDA government ahead of the 2019 general elections.
The government also cleared tax incentives under Section C of the Income Tax Act for employee contribution of up to 10 per cent towards the NPS account, provided there is a lock-in period of three years. The tax measures are scheduled to come into effect from April 1, 2019. These approved changes to National Pension Scheme or NPS will bring the pension plan on a par with schemes such as PPF and EPF.