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Budget 2019 expectations: NPS subscribers alert! These reforms to be made for private sector employees, self-employed and tax-payers?

Before the Budget 2019, the government already announced few reforms for NPS subscribers, which is expected to be in effect from April 2019. 

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Budget 2019 expectations: NPS subscribers alert! These reforms to be made for private sector employees, self-employed and tax-payers?
Cabinet has approved tax incentives under 80C of the Income Tax Act for employees' contribution to the extent of 10%.

Budget 2019 predictions: Union Budget 2019 is just around the corner and many investors eyeing various reforms that may be announced by Finance Minister Arun Jaitley on February 01, 2019. But, do you know that an early budget gift has already been given to employees by Prime Minister Narendra Modi-led government under the National Pension Scheme? There are a host of reforms which have been announced since Union Budget 2018 till date and these are going to come into effect from April 01, 2019. 

So if you are an NPS subscriber, then this is what you should know.

Archit Gupta, Founder & CEO, ClearTax said, "The Government has announced new rules regarding the National Pension Scheme (NPS). Some of the new rules include increasing government’s contribution from 10% to 14% for the central government employees, making 60% of the withdrawal corpus tax-free from earlier 40% and so on."

Before the Budget 2019, the government already announced few reforms for NPS subscribers, which is expected to be in effect from April 2019. 

One of the major good news is that the government’s contribution to NPS will increase from 10% to 14% on an employees basic salary. However, the employees will continue to contribute 10% to their basic salary in NPS.

A new withdrawal rule was also announced for government employees, where lump sum amount can be taken home on maturity in this scheme. The cabinet has allowed government employees to commute 60% of the fund accumulated at the time of retirement. Currently, this is 40%. 

Further, if an employee does not decide to commute any portion of the accumulated fund in NPS at the time of retirement and transfers 100% to annuity scheme, then their pension would be more than 50% of his last drawn pay. 

Cabinet has approved tax incentives under 80C of the Income Tax Act for employees' contribution to the extent of 10%.

Later on December 11 last year, the Finance Ministry announced, "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 the purchase of the 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.)"

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Following which, Gupta hopes that these provisions include all the taxpayers; central government employees, private sector employees and the self-employed as well. 

In Gupta's view, this will be clear from the changes made in the Finance Act, 2019 when announced.

However, whether the recommendations made by the government in NPS stays limit to central government employees, or would be made available for all sections of employees will be keenly watched.

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TAGS:
National Pension System (NPS)Budget 2019
Written By: ZeeBiz WebTeam
Updated: Fri, Jan 18, 2019
07:55 am
ZeeBiz WebDesk
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