India is expected to consider extending tax concessions on contributions and withdrawals in the upcoming Interim Budget 2024, in an effort to make the National Pension Scheme (NPS) more attractive, as per a Deloitte report
The government might specifically focus on individuals aged 75 and above.
This move is anticipated to bring about changes that could be unveiled during the Interim Budget presentation on February 1 by Finance Minister Nirmala Sitharaman.
Presently, there is a divergence in employer contributions for employees’ corpus building.
Corporations enjoy tax exemptions for contributions up to 10 per cent of the basic salary and dearness allowances in the case of NPS, whereas the same stands at 12 per cent for EPFO.
The Pension Fund Regulatory and Development Authority (PFRDA) is advocating for “parity” with the Employees’ Provident Fund Office (EPFO) concerning taxation on employer contributions, The Economic Times reported.
Crafting policies to attract NPS investors
In a bid to encourage long-term savings through NPS and ease tax burdens for seniors above 75, Deloitte has proposed making the annuity portion of NPS tax-free for individuals in that age group.
Furthermore, there is a plea to include NPS, along with interest and pension, in the list of exemptions that would spare senior citizens above 75 from the hassle of filing returns if they possess NPS proceeds.
Currently, the lump-sum withdrawal of 60 per cent remains tax-free.
A growing demand is also surfacing for tax breaks on NPS contributions under the new tax regime.
Currently, an individual’s contribution of up to Rs 50,000 to the NPS is deductible under Section 80CCD (1B) in the old tax regime but not in the new regime.
This is in addition to the Rs 1.5 lakh tax relief provided under Section 80C in the old regime.
For government employees, a committee led by Finance Secretary TV Somanathan was set up last year to review the pension system and propose enhancements.
The awaited Budget 2024 will determine if changes are necessary in the existing framework and structure of the NPS for government employees, with the aim of bolstering pensionary benefits while ensuring fiscal prudence for the welfare of the common citizens.
Source By: indiatoday
