DNA Money Edit: NPS sops to draw more subscribers

The move to hike government contribution under the National Pension Scheme (NPS) for central government employees to 14% and make the withdrawal by subscribers at the time of retirement completely tax-fee will definitely enhance the scheme’s appeal. 

Around 18 lakh government employees who joined service on or after January 1, 2004, are likely to be benefited. Private citizens aged between 18 and 60 years of age can also invest in the scheme. The NPS rejig is may cost the exchequer around Rs 2,840 crore for the next fiscal.

As per the existing NPS rules, 40% of the total accumulated corpus used to buy annuity at retirement or reaching the age of 60 was already tax-exempted. Out of 60% of the accumulated corpus withdrawn by the NPS subscriber at the time of retirement, 40% was tax-exempt too. 

Now, the entire 60% will be tax-free, bringing it on a par with other investment schemes like Employee Provident Fund and Public Provident Fund, both of which are exempt from tax at contribution, accumulation and withdrawal stages. In another tax benefit for subscribers, contribution under Tier-II of NPS will now be covered under Section 80C for deduction up to Rs 1.5 lakh for the purpose of I-T benefits, provided there is a three-year lock-in.