Budget 2024 tax news: The Modi government is considering making the National Pension System (NPS) more appealing by offering tax concessions on contributions and withdrawals, especially for senior citizens above 75 years. The Pension Fund Regulatory and Development Authority (PFRDA) has requested equal treatment with the Employees’ Provident Fund Office (EPFO) regarding tax exemptions for employer contributions.
It is anticipated that announcements regarding this matter will be made in the upcoming interim Budget, which will be presented by Finance Minister Nirmala Sitharaman on February 1, stated a PTI report.
Currently, there is a disparity in the tax exemptions for employer contributions between NPS and EPF. To encourage long-term savings through NPS and reduce tax burdens for senior citizens above 75 years, Deloitte expects the annuity portion of NPS to be made tax-free for holders from the age of 75.Additionally, NPS proceeds can be combined with interest and pension to eliminate the need for tax returns for senior citizens above 75 years. Currently, the lump-sum withdrawal of 60% from NPS is tax-free. There is also a demand for tax breaks on NPS contributions under the new tax regime.
Presently, an individual’s contribution of up to Rs 50,000 to NPS is eligible for deduction under Section 80CCD (1B) in the old tax regime, but not in the new tax regime. This deduction is in addition to the Rs 1.5 lakh tax relief provided under Section 80C in the old tax regime. The government had established a committee under Finance Secretary TV Somanathan last year to review the pension system for government employees and propose improvements.
It is anticipated that announcements regarding this matter will be made in the upcoming interim Budget, which will be presented by Finance Minister Nirmala Sitharaman on February 1, stated a PTI report.
Currently, there is a disparity in the tax exemptions for employer contributions between NPS and EPF. To encourage long-term savings through NPS and reduce tax burdens for senior citizens above 75 years, Deloitte expects the annuity portion of NPS to be made tax-free for holders from the age of 75.Additionally, NPS proceeds can be combined with interest and pension to eliminate the need for tax returns for senior citizens above 75 years. Currently, the lump-sum withdrawal of 60% from NPS is tax-free. There is also a demand for tax breaks on NPS contributions under the new tax regime.
Presently, an individual’s contribution of up to Rs 50,000 to NPS is eligible for deduction under Section 80CCD (1B) in the old tax regime, but not in the new tax regime. This deduction is in addition to the Rs 1.5 lakh tax relief provided under Section 80C in the old tax regime. The government had established a committee under Finance Secretary TV Somanathan last year to review the pension system for government employees and propose improvements.
The committee’s report is still pending. The committee will assess whether any changes are required in the existing framework and structure of NPS for government employees.
Its objective is to enhance the pensionary benefits of government employees covered under NPS while considering fiscal implications and the overall budgetary space. The aim is to maintain fiscal prudence and protect the interests of the common citizens.