NEW DELHI: In order to expand base of people, the government should consider giving tax incentives to pension sector, Hemant Contractor, Chairman PFRDA said on Wednesday.
“We have sought parity in any tax treatment for NPS (National Pension System) from the government. Then also waiver of service tax on the purchase of annuity. Right now purchase of annuity attracts service tax so we have requested the government to do away with that, these are the two things we have asked the government to consider in the budget proposal,” heHemant said.
The informal sector in India comprises 88 per cent of the workforce. However, currently only 3-4 per cent employees in this sector have pension coverage which is also inadequate in terms of the escalating living and healthcare costs, “The government is working on plans to bring them under some sort of pension coverage,” said Hemant. “People below poverty line don’t have the capacity to pay for the pension needs, so government financed schemes are must for them. We are discussing with the government to address these issues,” he said. The government’s Atal Pension Scheme had received a good response and it had been able to attract many individuals from the lower strata of society.
In India, only about 11-12 per cent of the working population belong to the organised sector and majority of them are well covered by the government pension schemes, he added. The FICCI-KPMG report pointed out the importance of considering higher tax deductions and giving more tax benefits to NPS.
“The survey highlights that pension relate to the existing salary levels and also must protect against inflation post retirement. In terms of tax benefits, it is important to consider higher tax deductions and giving more tax benefits to NPS,” said the report. According to G N Bajpai, former chairman-Securities and Exchange Board of India and LIC, said that the rate of return on pension schemes needed to be higher than the existing rates, which should be competitive with the world market rates.