7th Pay Commission Latest News Today: Central Government Employees get chance to save money
7th Pay Commission Latest News: Centre has provided three big reliefs for 18 lakh Central Employees in its first Union Budget. This has not received adequate attention and here we explain about how big a an opportunity this can become to save money and increase your bank account.
7th Pay Commission Latest News: Centre has provided three big reliefs for 18 lakh Central Employees in its first Union Budget. This has not received adequate attention and here we explain about how big a an opportunity this can become to save money and increase your bank account. Among the new benefits, what stands out is that central government has proposed tax exemption for 60 per cent withdrawal from New Pension Scheme (NPS) Fund. This scheme will be applicable from the financial year 2020-21.
1. Benefits for crores of government employees
Government employees who draw their salaries as per 7th pay Commission pay system will benefit in a major way. Apart from the staff at Centre, most of the states have adopted the New Pension Scheme. Crores of state employees are getting benefit from the NPS. Now, they will gain more advantage from the government's proposal. According to the proposal, the central employees will not have to pay any tax on the withdrawal of 60 percent amount from the NPS account during the time of retirement. While, in the current system, only 40 per cent amount is tax-free.
2. The government hikes its NPS contribution
The Modi government has increased its contribution in the NPS account of government employees from 10 per cent to 14 per cent in its last years of governance, which also got the clearance from Central Cabinet. According to the Livemint news, the contribution of employees is kept the same at 10 per cent. This will accumulate a large amount of money till retirement in the employees' NPS account.
3. Advantage of Section 80C
The central government has proposed in its budget that the contribution made in the Tier-2 NPS account should be included under the exemption of Section 80C of Income Tax. If the lock-in period of fund is three years, then it should be included under tax exemption.
What is NPS account?
There are two types of account in NPS -- Tier 1 and Tier 2. NPS Tier-1 account is a retirement account, which is compulsory, while Tier-2 account is an alternative account which has withdrawal facility.