Streamlining of National Pension System- Decision

Streamlining of National Pension System (NPS)

Posted On: 10 DEC 2018 3:01PM by PIB Delhi

Decision.

The Union Cabinet in its Meeting on 6 December, 2018 has approved the following

proposal for streamlining the National Pension System (NPS).

· Enhancement of the mandatory contribution by the Central Government for its

employees covered under NPS Tier-I from the existing 10% to 14%.

· Providing freedom of choice for selection of Pension Funds and pattern of

investment to central government employees.

· Payment of compensation for non-deposit or delayed deposit of NPS

contributions during 2004-2012.

· Tax exemption limit for lump sum withdrawal on exit has been enhanced to

60%. With this, the entire withdrawal will now be exempt from income tax. (At

present, 40% of the total accumulated corpus utilized for purchase of annuity is

already tax exempted. Out of 60% of the accumulated corpus withdrawn by the NPS

subscriber at the time of retirement, 40% is tax exempt and balance 20% is taxable.)

· Contribution by the Government employees under Tier-II of NPS will now be

covered under Section 80 C for deduction up to Rs. 1.50 lakh for the purpose of

income tax at par with the other schemes such as General Provident Fund,

Contributory Provident Fund, Employees Provident Fund and Public Provident Fund

provided that there is a lock-in period of 3 years.

Background

The new entrants to the central government service on or after 01.01.2004 are covered

under the National Pension System (NPS). The Seventh Pay Commission (7 CPC), during its

deliberations, examined certain concerns regarding NPS and made recommendations in the

year 2015. The 7 CPC recommended for setting up of a Committee of Secretaries in this

regard. Accordingly, a Committee of Secretaries was constituted by the Government to

suggest measures for streamlining the implementation of NPS in the year 2016. The

Committee submitted its report in the year 2018. Accordingly, based on the

recommendations of the Committee, draft Cabinet Note was placed before the Cabinet for its

approval.

CVPRASAD