For the succeeding budget, Pension fund regulator PFRDA will recommend to the government to make employers' contribution of 14% under the National Pension Scheme to become effectively tax-free for all the sections of subscribers. Currently, the 14% limit is given only to the CG employers.
"We will be proposing things like 14% contribution by employers to be made completely tax free for all. So we request the government to provide it to all the employers, whether that is state governments or separate corporate entities so that the contributors across the board can get this advantage," Pension Fund Regulatory and Development Authority Chairman Supratim Bandyopadhyay said.
If the employer is providing towards the employee's NPS account, subtraction up to a certain percentage of salary (basic + DA) irrespective of any frontier restricts for income tax deduction under the Section 80 CCD(2). For any central government employees, it is 14% of salary and for the others, it is 10%.
The PFRDA chairman also stated that the states are requesting that the 14% tax benefit be given to the state government employees further.
Additionally, the PFRDA (Pension Fund Regulatory and Development Authority) will request the government to extend the benefit of the tier-II NPS account as totally tax-free for all contributors. Recently, the department was granted to the central government employees following the Section 80C.
A central government employee's benefaction towards the Tier-II account of NPS for availing the income tax reduction (up to ₹1.5 lakh) per year will have a lock-in duration of 3 years.
There are two sorts of NPS accounts -- tier-I and tier-II. A tier-II account under which NPS is not an obligatory account, one can have it along with the additional tier-I account.
Meantime, PFRDA expects to establish the method for assigning NPS Trust from itself in the next financial year. In the Union Budget for 2019-20, the government had intended to distribute the NPS Trust from the pension index to address issues of the dispute of interest.
The trust was organized by the PFRDA for taking care of the assets and repositories under the NPS. The proposal to separates the two job positions has been under consideration for the last few years.
Abiding in view the wider interest of the subscribers and to sustain arm's length proportion of the NPS Trust with the PFRDA, measures will be taken to sequester the NPS Trust from the authority with appropriate organizational structure, Finance Minister Nirmala Sitharaman had said in July 2019 while conferring the full budget for FY2020 post the generic elections.